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Suppose you are the manager of a home-building company and the government is considering eliminating the deduct-ability of mortgage interest payments. A Typical consumer's marginal tax rate is 25% and the elasticity of demand for new homes is -1.5. Your boss want to know the impact of the proposed government policy on your business. What would you tell him? Suppose that marginal tax rates were reduced to 20% as part of the tax bill. How does this change your answer?

Microeconomics, Economics

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