A consumer spends his income on food and rent. The government places a
A consumer spends his income on food and rent. The government places a $1 tax on food. To restore the pre-tax consumption level of food the rebate paid to consumers will be smallest when
A) the own price elasticity of demand for food is 2, and the income elasticity of demand for food is 5.
B) the own price elasticity of demand for food is 5, and the income elasticity of demand for food is 5.
C) the own price elasticity of demand for food is 2, and the income elasticity of demand for food is 10.
D) the own price elasticity of demand for food is 5, and the income elasticity of demand for food is 10.
ANSWER
C
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