Answer to Question #203263 in Microeconomics for Haider

Question

 In what sense is taxing food a “good” way to raise revenue?

Answer 1

Taxing food is a "good" way to raise revenue because food is an important item and it is very essential for the survival of individuals. Thus the demand for food is more inelastic. People will buy food even though the price increases. Taxing a commodity whose demand curve is very inelastic, in this case, food, leads to a large increase in revenue collected by the government and will create only a minimal dead weight loss in the economy.