If a government wants to maximize revenues from a tax,it should
A) impose it on sellers.
B) impose it on consumers.
C) choose a good with a relatively elastic demand.
D) choose a good with a relatively inelastic demand.

Question

Quizplus · Accepted Answer

If a good has a relatively inelastic demand, it means that consumers will still buy the good even if the price increases due to the tax imposed. This means that the government can generate more revenue without significantly reducing the quantity demanded by consumers. In contrast, if a good has a relatively elastic demand, consumers are more likely to reduce their quantity demanded in response to a price increase, which can offset the government's revenue increase from the tax. Therefore, choosing a good with a relatively inelastic demand is the best option for maximizing tax revenue.

If a Government Wants to Maximize Revenues from a Tax,it