Taxes on particular goods discourage their consumption. Economists say that such taxes “distort consumer demands.” In terms of the elasticity of demand or elasticity of supply for the commodities in question, what sort of goods would you choose to tax to achieve the following objectives? Collect a large amount of tax revenue Distort demand as little as possible Discourage consumption of harmful commodities Discourage production of polluting commodities

BuyFind

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
BuyFind

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

Solutions

Chapter 6, Problem 3TY
Textbook Problem

Taxes on particular goods discourage their consumption. Economists say that such taxes “distort consumer demands.” In terms of the elasticity of demand or elasticity of supply for the commodities in question, what sort of goods would you choose to tax to achieve the following objectives?

  1. Collect a large amount of tax revenue
  2. Distort demand as little as possible
  3. Discourage consumption of harmful commodities
  4. Discourage production of polluting commodities

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