Final answer:
Revenue-seeking legislatures impose heavy excise taxes on goods with inelastic demand such as cigarettes, where price increases have little effect on consumption.
Step-by-step explanation:
Revenue-seeking legislatures place heavy excise taxes on goods whose demand is thought to be inelastic. This means consumers will continue to purchase these goods regardless of price increases. Examples of such goods include cigarettes, alcohol, and gasoline. Due to the inelasticity of demand for cigarettes, for instance, even significant excise taxes lead to only a modest reduction in the quantity smoked by adults, illustrating a demand elasticity of about 0.3. While some might believe increasing taxes could reduce smoking substantially, this may not be the case if the demand remains inelastic; instead, strategies like anti-smoking campaigns may be more effective at reducing consumption, particularly among youths, where the demand is more elastic.
The imposition of heavy excise taxes on goods with inelastic demand is a calculated fiscal approach, allowing governments to bolster revenue streams without experiencing substantial declines in consumption. This strategy capitalizes on the economic concept of inelasticity, making it an effective tool for revenue-seeking legislatures.