Home-building company

Reference no: EM137871

Q. Suppose you are the manager of a home-building company and the government is considering eliminating the deduct-ability of mortgage payments interest. As distinctive consumer's marginal tax rate is 25% and the elasticity of demand for new homes is -1.5. Your boss wants 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?

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