In order to raise more revenue for a certain period; the government should impose higher taxes on goods whose demand

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

Correct Answer:

Option B – inelastic

Explanation

High taxes should be imposed on goods whose demand is inelastic.

Inelastic demand is when the buyer’s demand does not change as much as the price changes. This means that no matter how high the prices may increase as a result of high taxes or other factors, people will still be willing to buy the goods.