Why is it wiser for the government to put a sales tax on a good that is demand inelastic than on one that is demand elastic?© BrainMass Inc. brainmass.com October 25, 2018, 3:37 am ad1c9bdddf
Technically sales tax is paid by the customer and is collected by the seller on behalf of tax authority. But sales tax increases the price of good and affects the demand. Extent by which demand is affected depends upon price elasticity ...
Solution discusses why it is wiser for the government to put sales tax on a good that has inelastic demand.
How does price elasticity of demand affect taxation?
You are a chairperson of a state tax commission responsible for establishing a program to raise new revenue through exercise taxes. Why would elasticity of demand be important to you in determining the products on which the taxes should be levied?View Full Posting Details