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WAEC Economics 2015 Question 11

Question 11

Public Finance

Government revenue will increase if taxes are levied on goods with

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

Answer: C (perfectly inelastic demand)

Explanation

With perfectly inelastic demand the quantity bought does not fall when the tax raises the price.