Asked by Jillian Peace on May 01, 2024

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If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price elastic.

Price Elastic

Price Elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price, indicating the sensitivity of consumers or producers to price changes.

Tax Revenue

The revenue that governments acquire from taxes.

  • Identify the connection between demand's price elasticity and the generation of tax revenue.
  • Know the distinction between price elastic and price inelastic demand.
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SW
shania wilsonMay 06, 2024
Final Answer :
False
Explanation :
Taxing goods for which demand is price elastic would not be effective for generating significant tax revenue because consumers would likely reduce their consumption significantly in response to price increases, leading to lower overall tax collection. Instead, taxing goods with inelastic demand, where consumers are less sensitive to price changes, tends to generate more revenue.