In order to increase revenue; government should tax commodities for which demand is?

A. perfectly price inelastic
B. price inelastic
C. price elastic
D. unitary elastic

Correct Answer:

Option B – price inelastic

Explanation

For government to generate more revenue, tax on commodities should be price inelastic. Inelastic means when tax is imposed, consumers do not react to tax i.e more of the goods are demanded.