Price Elasticity and Taxation

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Economics

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“In comparing relatively elastic demand to relatively inelastic demand, explain the difference between the government tax revenues collected and the economic burden of a tax in these two situations.”

*When completing the essay, you want to analyze if the government tax revenue will be greater on taxing elastic goods or inelastic goods. Make sure to explain thoroughly, with support from the lecture notes, why you believe your answer to be true. Additionally, looking at the economic burden (who pays more between the consumers/producers), explain who pays more if the good is elastic and who pays more if demand for the good is inelastic. Make sure to support your argument.

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Price Elasticity and Taxation
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If the demand is elastic then the effect of government tax will lower the demand for a
particular product significantly but have a negative effect on raising revenue. The economic
burden of an elastic demand will fall more on the seller than the buyer since the seller must lower
his price to keep the buyer interested. Products which are price elastic have greater significant
effects on the demands of the products by the consumers. Leveraging taxes by the government
on such products will increase the prices above the market price creating a ceiling effects in
purchasing the products. T...

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