In order to increase revenue, government should tax commodities for which demand is
Answer Details
When the demand for a commodity is perfectly price inelastic, it means that people will buy the same amount of the commodity no matter how much it costs. Therefore, if the government increases the tax on this commodity, people will still buy the same amount of it, and the tax revenue will increase.
When the demand for a commodity is price inelastic, it means that people will buy a relatively small amount less of the commodity if the price increases. Therefore, if the government increases the tax on this commodity, people will still buy it, but they will pay more for it, and the tax revenue will increase.
When the demand for a commodity is price elastic, it means that people will significantly reduce the amount they buy if the price increases. Therefore, if the government increases the tax on this commodity, people will buy less of it, and the tax revenue may not increase as much as expected.
When the demand for a commodity is unitary elastic, it means that the change in quantity demanded is exactly proportional to the change in price. Therefore, if the government increases the tax on this commodity, the tax revenue will increase, but the increase in price may cause people to buy slightly less of it.
Overall, if the demand for a commodity is relatively inelastic, the government may be able to increase revenue by increasing taxes on it. However, if the demand for a commodity is relatively elastic, the government may not be able to significantly increase revenue by increasing taxes on it, as people may switch to other alternatives or reduce their consumption of the commodity.