The government wants to raise additional tax revenues with the least disruption to prevailing demand patterns. For which product should an excise tax be levied?

Question

Quizplus · Accepted Answer

Diapers are considered a necessity for families with babies, meaning their demand is relatively inelastic. This means that even with the imposition of a tax, the quantity demanded is likely to change very little, causing minimal disruption to prevailing demand patterns.

The Government Wants to Raise Additional Tax Revenues with the Least