The concept of elasticity with respect to taxation holds that tax yields should be automatically responsive to changes in economic conditions. For example, as per capita income grows, revenues should also increase without increases in the tax rate.

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Elasticity in taxation means that tax revenues will adjust automatically to economic conditions. As the economy grows and per capita income increases, the amount of tax collected increases even if the tax rate remains constant, because the tax base (income, consumption, etc.) has expanded.

The Concept of Elasticity with Respect to Taxation Holds That