When governments wants to discourage consumption, they tax goods whose demand is
Answer Details
When governments want to discourage consumption of a certain good, they tax goods whose demand is price inelastic. This is because when the demand for a good is price inelastic, consumers are not very responsive to changes in price and will continue to buy the good even if the price increases due to taxes. By taxing goods with price inelastic demand, the government can increase the price of the good and reduce its consumption, without causing a significant decrease in government revenue. In contrast, if a good has price elastic demand, consumers are very sensitive to changes in price, and even small increases in price may cause a significant decrease in demand, resulting in a decrease in government revenue.