Asked by Nishallinee Shanmugam on Jun 19, 2024
Verified
If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price inelastic.
Price Inelastic
Describes a situation where the demand for a product does not change significantly when its price changes.
Tax Revenue
The financial earnings governments receive via taxing.
- Comprehend the link between the elasticity of price demand and tax income production.
- Determine the conditions under which a tax imposed on products can successfully lower consumption levels while also yielding financial returns.
Verified Answer
DP
Dayra PimentelJun 25, 2024
Final Answer :
True
Explanation :
Goods with price inelastic demand tend to see less reduction in quantity demanded when their prices increase, meaning that taxing these goods can generate significant revenue without greatly reducing the quantity sold.
Learning Objectives
- Comprehend the link between the elasticity of price demand and tax income production.
- Determine the conditions under which a tax imposed on products can successfully lower consumption levels while also yielding financial returns.
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