If the government wants to generate large revenues from placing a tax on the consumption of a particular good, it should choose a good for which
A) the demand is price elastic
B) the demand is unitary elastic
C) the demand is price inelastic
D) there are many good substitutes available for the good

Question

Quizplus · Accepted Answer

When demand is price inelastic, consumers are less sensitive to price changes, meaning they will continue to buy the good even if the price increases due to a tax. This allows the government to generate more revenue.

If the Government Wants to Generate Large Revenues from Placing