Question

Governments often use a sales tax to raise tax revenue, which is the tax per unit times the quantity sold. Will a specific tax raise more tax revenue if the demand curve is inelastic or elastic? A specific tax will raise more tax revenue if the demand curve is A. elastic because the quantity demanded will not decrease. B. inelastic because consumers will be less sensitive to price. C. elastic because the quantity demanded will decrease by more. D. elastic because the demand curve will be steeper. E. inelastic because the tax incidence will be lower.

          Governments often use a sales tax to raise tax revenue, which is the tax per unit times the quantity sold. Will a specific tax raise more tax revenue if the demand curve is inelastic or elastic?

A specific tax will raise more tax revenue if the demand curve is

A. elastic because the quantity demanded will not decrease.
B. inelastic because consumers will be less sensitive to price.
C. elastic because the quantity demanded will decrease by more.
D. elastic because the demand curve will be steeper.
E. inelastic because the tax incidence will be lower.

Governments often use a sales tax to raise tax revenue, which is the tax per unit times the quantity sold. Will a specific tax raise more tax revenue if the demand curve is inelastic or elastic?

A specific tax will raise more tax revenue if the demand curve is

A. elastic because the quantity demanded will not decrease.
B. inelastic because consumers will be less sensitive to price.
C. elastic because the quantity demanded will decrease by more.
D. elastic because the demand curve will be steeper.
E. inelastic because the tax incidence will be lower.

Added by Allie M.

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