A government that wants to get more revenue will increase the tax on commodities with...
ECONOMICS
WAEC 2013
A government that wants to get more revenue will increase the tax on commodities with a
- A. high price elasticity of demand
- B. low price elasticity of demand
- C. high income elasticity of demand
- D. low income elasticity of demand
Correct Answer: B. low price elasticity of demand
Explanation
Goods that have low price elasticity of demand are goods with little or no change in demand as their prices go up. Government can generate revenue by increasing taxes on such goods and the demand for it wont be affected. Example of such goods are luxurious goods.
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