Excise taxes that raise the MOST revenue and cause the LEAST deadweight loss are likely to be levied on goods for which demand is _____ and supply is _____.

Question

Quizplus · Accepted Answer

Excise taxes on goods with inelastic demand and inelastic supply raise the most revenue because consumers and producers are less sensitive to price changes, thus they continue buying or selling despite the tax. This minimizes deadweight loss since the quantity traded is not significantly reduced.

Excise Taxes That Raise the MOST Revenue and Cause the LEAST