Question

Which of the following statements is true?

A A proportional tax is one which takes from high income people a larger fraction of their income than it takes for low income people
B taxes on commodities of services which can be shifted elsewhere are usually called direct taxes
C The sole proprietor is a legal entity
D the influence of demand on price will be smallest on the short run
E the cost of production is the most important determining factor of supply in the long run

Answer 1

The correct answer is D. the influence of demand on price will be smallest on the short run

In the short run, demand is likely to be more inelastic (low = less than 1). If people are used to buying a good, then when the price goes up, they will tend to keep buying it out of habit.

Previous question Next question