The government is thinking about increasing the tax on petrol to raise additional revenue rather than to promote conservation. The tax will result in the greatest amount of tax revenue if the price elasticity of demand for petrol equals:

Question

Quizplus · Accepted Answer

When the price elasticity of demand is inelastic (less than 1), such as 0.5, consumers are less responsive to price changes, meaning they will continue to buy petrol despite the tax increase, leading to higher tax revenue.

The Government Is Thinking About Increasing the Tax on Petrol