The best explanation for placing taxes on tobacco products and alcohol is that
A) smoking and drinking are sinful behaviours.
B) they punish producers of tobacco and alcohol.
C) the public supports taxing these items.
D) demand for tobacco and alcohol tends to be inelastic.
E) demand for tobacco and alcohol tends to be elastic.

Question

Quizplus · Accepted Answer

Placing taxes on tobacco products and alcohol is mainly done because the demand for these items tends to be inelastic. This means that even if the price goes up due to taxes, people will still buy them in the same quantity. Therefore, the tax revenue generated from these items is relatively stable and can be used to fund various public services.

The Best Explanation for Placing Taxes on Tobacco Products and Alcohol