Which would be a better source of tax revenue for the government, a good with elastic or a good with an inelastic demand? Explain your reasoning
What will be an ideal response?
Inelastic goods are better sources of tax revenue because, as price rises, the equilibrium quantity does not decrease by as much as that of a good with elastic demand. The government's tax revenue, which depends on the equilibrium quantity of the good, is larger when a good with an inelastic demand is taxed.
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The marginal propensity to consume measures the ratio of the:
a. average amount of our income that we spend. b. average amount of our savings that we spend. c. change in consumer spending to a change in money holdings. d. change in consumer spending to a change in interest rates. e. change in consumer spending to a change in income.
Which of the following statements is not correct?
a. A patent is a way for the government to encourage the production of a good with technology spillovers. b. A tax is a way for the government to reduce the production of a good with a negative externality. c. A tax that accurately reflects social costs produces the socially optimal outcome. d. Government policies cannot improve upon private market outcomes.
In pure competition, the demand for the product of a single firm is perfectly:
A. elastic because many other firms produce the same product. B. inelastic because the firm produces a unique product. C. inelastic because many other firms produce the same product. D. elastic because the firm produces a unique product.
For a country with a fixed exchange rate and no sterilization: When the FE curve is steeper than the LM curve, a negative domestic spending shock to the IS curve creates a balance of payments surplus, which then causes the LM curve to shift to the right.
Answer the following statement true (T) or false (F)