A(n)________ in the elasticity of supply or demand in a market for a good that is taxed would tend to ________ tax revenue from that tax.

Question

Quizplus · Accepted Answer

If the elasticity of supply or demand in a market for a good that is taxed increases, it means that consumers or producers are more responsive to changes in price. This would lead to a decrease in tax revenue from that tax because as the tax increases, the price of the good will increase and demand will decrease (if demand is elastic) or supply will decrease (if supply is elastic), resulting in lower sales and hence lower tax revenue. Therefore, a greater elasticity of supply or demand would tend to decrease tax revenue from that tax.

A(n)________ in the Elasticity of Supply or Demand in a Market