Since the supply of undeveloped land is relatively inelastic a tax on undeveloped land would generate ?
Correct answer: D. a small deadweight loss and the burden of the tax would fall on the landlord
- A. a small deadweight loss and the burden of the tax would fall on the renter
- B. a large deadweight loss and the burden of the tax would fall on the landlora
- C. a large deadweight loss and the burden of the tax would fall on the renter.
- D. a small deadweight loss and the burden of the tax would fall on the landlord
Explanation
With relatively inelastic supply, the quantity of land changes little, so the tax creates a small deadweight loss. Landlords bear most of the burden because they cannot substantially reduce the supply of undeveloped land.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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