Government revenue will increase if tax is imposed on a good whose demand is

Assessment: WAEC SSCE - Economics - 1999 (Objective) Subject: Economics

Question 1 Report

Government revenue will increase if tax is imposed on a good whose demand is
Answer Details
If a tax is imposed on a good whose demand is inelastic, it means that consumers will continue to purchase the good despite the increase in price due to the tax. This is because the good is a necessity or there are no close substitutes available. As a result, the government revenue will increase because the tax is collected on every unit of the good sold. In contrast, if a tax is imposed on a good whose demand is elastic, consumers will reduce their consumption of the good due to the increase in price, resulting in a decrease in government revenue.

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