why government raise more money from taxation when taxing commodities with inelastic demand?
- Kwok WaiLv 71 十年前最愛解答
It is because for commodities with inelastic demand, when government raise taxes on those commodities, the prices would be risen and quantity demanded would be decreased. However, the percentage fall in quantity demanded is much smaller than the percentage rise in price because the demand is inelastic, hence government can increase tax revenue on those goods. Otherwise, tax revenues would be lowered for goods with elastic demand.