Answer to Question #113488 in Macroeconomics for Ayanda

Question

Which one of the following statements is/are correct?

a) When the price elasticity of demand is relatively elastic, taxes levied should be low.
b) Price inelastic goods generate more tax revenue in comparison to price elastic goods provided the tax rate is the same.
c) It is more efficient to levy low tax rates on a broad tax base than high tax rates on a narrow base.
d) The size of the excess burden depends on whether the taxed good is a necessity or luxury.

Answer 1

Answer: a & b