If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue, it would want to tax an industry with
A)elastic supply and demand curves.
B)inelastic supply and demand curves.
C)inelastic supply and elastic demand.
D)elastic supply and inelastic demand.

Question

If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue, it would want to tax an industry with
A)​elastic supply and demand curves.
B)​inelastic supply and demand curves.
C)​inelastic supply and elastic demand.
D)​elastic supply and inelastic demand.

Quizplus · Accepted Answer

Elastic supply and demand curves mean that both suppliers and consumers are very responsive to price changes. A tax in such a market would significantly reduce the quantity exchanged because both sides can easily adjust their behavior (suppliers produce less, consumers buy less), but it wouldn't raise much revenue because the transactions significantly decrease.

If the Government Wanted a Tax to Reduce the Quantity