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Author Question: Which would be a better source of tax revenue for the government, a good with elastic or a good with ... (Read 86 times)

daltonest1984

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on: Jun 29, 2018
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?

Question 2

Activity aimed at creating artificial barriers to entry into a particular market
 
  A) is rent seeking.
  B) has no social cost.
  C) improves competition.
  D) improves the economy's efficiency.
Foundations of Microeconomics ¦ Bade, Parkin ¦ 8th Edition
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qytan

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Reply #1 on: Jun 29, 2018
Answer to Question 1

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.

Answer to Question 2

A


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