Your local government needs to increase tax revenue. To increase tax revenue it can either increase the property tax on residential property or increase the property tax on all property. The government wants to impose the smallest excess burden possible. What would your recommendation be?

Question

Quizplus · Accepted Answer

Increasing the property tax on all property is recommended because the demand for all property is generally less elastic than the demand for residential property alone. Less elastic demand means that consumers are less sensitive to price changes, resulting in a smaller excess burden for the tax.

Your Local Government Needs to Increase Tax Revenue