Asked by Nicholas Paradas on May 18, 2024
Verified
The more ________ the demand is for a product, the ________ tax revenue that will be raised by taxing the product.
A) elastic; more
B) inelastic; more
C) inelastic; less
D) Tax revenues are unrelated to a product's price elasticity of demand.
Price Elasticity
A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting its sensitivity.
Tax Revenue
The income that is gained by governments through taxation.
Inelastic Demand
A situation where the demand for a product does not significantly change with a change in its price.
- Recognize the relationship between the price elasticity of demand and tax revenue generation.
Verified Answer
MH
Mahlatse HendreecahMay 24, 2024
Final Answer :
B
Explanation :
Inelastic demand means that consumers are less sensitive to price changes, so when a product with inelastic demand is taxed, consumers are likely to continue purchasing it despite the price increase, leading to higher tax revenue.
Learning Objectives
- Recognize the relationship between the price elasticity of demand and tax revenue generation.
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