The government wants to increase its tax revenue and plans to implement an additional sales tax. The government will raise more tax revenue if it taxes a good with an ________ rather than a good with an ________.

Question

Quizplus · Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so they will continue to buy the good even after the tax is added, leading to higher tax revenue.

The Government Wants to Increase Its Tax Revenue and Plans