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WAEC Economics 2013 Question 31

Question 31

Public Finance

A government that wants to get more revenue will increase the tax on commodities with a

  1. A.high price elasticity of demand.
  2. B.low price elasticity of demand.
  3. C.high income elasticity of demand.
  4. D.low income elasticity of demand.
Show the answer and explanation

Answer: B (low price elasticity of demand.)

Explanation

With inelastic demand, people keep buying after the tax, so revenue rises.