Questions 1 - 3 relate to the following information. Suppose the elasticity of demand, epsilon, is negative 0.5, and the elasticity of supply, eta, is 0.25 at the equilibrium price. 1. Which of the following statements is true? A. A 1% increase in price leads to an increase in the quantity demanded by (roughly) 0.5% B. The demand curve is steeper than the supply curve at the equilibrium price C. None of the above D. The supply curve is steeper than the demand curve at the equilibrium price

2. If a specific tax of $3 per unit is imposed, then the price that consumers pay will rise by how much? A. $1 B. $0.50 C. $0.33 D. $0.66

3. The burden or tax incidence falls more heavily on? A. Consumers B. Producers C. The burden falls on both consumers and producers equally D. We require more information to answer this question