It's about the easticity of demands. The question is if you are chairsperson of a state tax commision responsible for establising a program to raise new revenue through excise taxes. Would elasticity of demand be important to you in determining those products on which excises should be levied?
2007-10-09 17:25:02 · 1 answers · asked by ½ÃÂù ± 2 in Social Science ➔ Economics
Yes. Elasticity refers to the relationship between the price of a good and its demand. If the consequence of raising the price of a good negatively impacts its demand, the good is considered elastic. If raising the price does not have a noticeable impact on demand, the good is considered inelastic. A savvy commissioner would create more revenue taxing goods that are inelastic since raising their prices would not significantly reduce their demand.
2007-10-09 17:36:14 · answer #1 · answered by Crookedlettaman 4 · 0⤊ 1⤋