Question

Use the economic theories discussed, to determine whether the statement in Italics in the following question is True, False or Uncertain. Please explain using both words and graph(s) and make it concise.

A government is interested in raising tax revenue for unemployment relief. A group of advisors offer the following information on four goods for consideration for application of a tax. Each of these goods has roughly the same expenditure in the economy. The best good to tax will be chocolate products as the elasticity is low. Good Chocolate products Cigarettes Lumber for building Chicken products Price elasticity of demand -0.3 -0.4 -1.3 -1.1

Answer 1

True. Moreover Since chocolate products & Cigarettes having inelastic demand and chocolate products inelastic in comparison to cigarettes thus increasing in price of due to addition tax will have much lower effect buyers "consumption pattern. of increase in more total revenue price of chocolate products will have

Elasticity (it measures how much buyers & sellers respond to changes in Mating condin) AQ L elasticity 2 7. AQ 7. AP y inelastic its 12 led <1 le > 1 elastic when Price is it's nelastic p in ph leads to in TR i in P leads do Tin TR when Price is onelastic → (edi) when Price is unit elastico - A in P (edal) doesn't effect TR