The more inelastic the supply and demand curves in a market, the more taxes in that market distort behaviour, and the more likely it is that a tax cut will raise tax revenue.

Question

Quizplus · Accepted Answer

The more inelastic the supply and demand curves in a market, the less taxes in that market distort behavior, and it is less likely that a tax cut will raise tax revenue due to the Laffer Curve principle, which suggests that tax revenue increases up to a certain point with higher tax rates and decreases beyond that point.

The More Inelastic the Supply and Demand Curves in a Market