Answer to Question #14076 in Microeconomics for izzaham

Question #14076
a stat government wants to increase the taxon cigarettes toincrease revenue.This tax would only be effective in raising in new tax revenues if the price elasticity of demand is ?
1
Expert's answer
2012-09-06T10:08:25-0400
The tax will only be effective if price elasticity of demand is inelastic. Otherwise price increase that will be caused by extra tax (it will be added to regular price) will cause significant decrease in quantity bought – it won`t increase total revenue

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS