WAEC Economics 2018 Objective — Question 39

Question 39 of 50 from the West African Examinations Council (WAEC) Economics 2018 Objective paper, with the correct answer and a full explanation.

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

A. perfectly price inelasticCorrect
B. price inelastic
C. price elastic
D. of unitary elasticity

Explanation

Taxing a commodity with perfectly inelastic demand ensures the tax raises the maximum possible revenue, since quantity demanded doesn't fall in response to the resulting price rise.

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