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JAMB Economics 1987 Question 38

Question 38

Public Finance

In order to raise more revenue for a certain period, government should impose higher taxes on goods whose demand is

  1. A.elastic
  2. B.inelastic
  3. C.perfectly elastic
  4. D.unitary elastic.
Show the answer and explanation

Answer: B (inelastic)

Explanation

When demand is inelastic, people keep buying almost as much after the tax raises the price, so tax revenue rises.