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 loading... or elastic loading... ​? a specific tax will raise more tax revenue if the demand curve is

a. elastic because the quantity demanded will decrease by more.
b. elastic because the quantity demanded will not decrease.
c. inelastic because consumers will be less sensitive to price.
d. elastic because the demand curve will be steeper.
e. inelastic because the tax incidence will be lower.

Answer 1

A specific task will likely raise more tax revenue if the demand curve is inelastic in which the demand is likely to be insensitive in regards to change and by that, the tax incidence will likely result of being lowered. The correct answer is letter e.