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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

“If government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand.” What is the rationale for this statement?

To determine

The government tax revenue and the inelastic demand of a good.

Explanation

Tax is a major income source of the government. The government can raise the revenue by imposing the tax on a good with inelastic demand than a product with elastic demand. This is because if a commodity has inelastic demand, then it does not increase or decrease, respectively, with the fall or rise in its price...

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