Answer to Question #247383 in Macroeconomics for ffaarriieess

Question

 Explain and demonstrate using appropriate examples how elasticity when it is zero is applied at the level of the government with respect to the setting of prices for various types of goods and services.

Answer 1

Governments may find income elasticity of demand valuable when deciding on tax and spending strategies. The amount that the quantity desired of a commodity or service changes when consumers' earnings fluctuate is known as income elasticity of demand. The government simply wants people to spend more money on goods and services in general.