A higher rate is MOST likely to decrease the amount of revenue that the government collects from an excise tax if demand is _____ and supply is _____.

Question

Quizplus · Accepted Answer

When both demand and supply are elastic, consumers and producers are more responsive to price changes. Thus, a higher tax rate can lead to a significant decrease in the quantity bought and sold, potentially reducing the total tax revenue.

A Higher Rate Is MOST Likely to Decrease the Amount