Task: Need a understanding with this assignment in Economics. Need a explanation on each statement true or false and why.
1. Governments have sometimes forgotten about elasticity when they formulate tax policy. A few years ago the city fathers in Washington DC wanted to increase revenues so they increased the gas tax by ten cents a gallon. Revenues from gasoline taxes decreased instead of increasing. The tax increase also managed to put several service stations out of business. Why?
2. Using the total revenue test for elasticity, when there is a direct relationship between price and total revenue the demand is elastic.
3. Economic activity is not a zero sum game. When trade takes place in a market without force or fraud both parties can win.
4. Profit and loss determines how the factors of production are allocated?