Related to the Economics in Practice on p. 102: Researchers found that after a few years of a tax relief policy for foreigners, the fraction of foreigners in the top 0.5 percent of income earners in Denmark almost doubled. The researchers concluded that for this group of workers, labor supply seems to be
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic

Question

Quizplus · Accepted Answer

Since the fraction of foreigners in the top income bracket almost doubled after the tax relief policy, it implies that they responded positively (increased their labor supply) to the policy. This suggests that their labor supply was elastic, as they were willing and able to work more as a result of the tax relief policy.

Related to the Economics in Practice on P