WAEC Economics 2015 Objective — Question 11

Question 11 of 50 from the West African Examinations Council (WAEC) Economics 2015 Objective paper, with the correct answer and a full explanation.

Government revenue will increase if taxes are levied on goods with a

A. perfectly elastic demand
B. fairly elastic demand
C. perfectly inelastic demandCorrect
D. unitary elastic demand

Explanation

When demand is perfectly inelastic, quantity demanded doesn't fall when tax raises the price, so government can maximize tax revenue without losing sales volume.

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