Question

An increase in the size of a tax is most likely to increase tax revenue in a market with elastic demand and elastic supply.

a) elastic demand and inelastic supply.
b) inelastic demand and elastic supply.
c) inelastic demand and inelastic supply.

Answer 1

elastic demand and inelastic supply

Step-by-step explanation:

• When the demand for a substance goes up the price of a similar product also goes up this emphasis on the elasticity of demand of the product which is due to the increase in the rise in the revenues of the demanded product.

• Thus an increase in revenue the total demand will be elastic and increased price has a larger demand on the quantity demanded so the example of petrol or oil product, sale of the cigar, and chocolate all depends on the inelastic production supply.

• Based on the availability of raw mater, Length, and complexity of production, the Mobility of factors and time taken to make.