If the purpose of a tax is to raise revenue, it would be best for government to place the tax on which of the following goods?
A) a non-essential good, such as holiday travel
B) a good whose demand curve is highly elastic
C) a good that has several close substitutes
D) a good whose demand curve is highly inelastic
E) a good whose demand curve is unit elastic

Question

Quizplus · Accepted Answer

A good whose demand curve is highly inelastic is the best option for raising revenue through a tax because consumers are less sensitive to price changes and will continue to buy the product despite the tax, ensuring steady revenue for the government.

If the Purpose of a Tax Is to Raise Revenue