Question Excise Taxes and Tax Revenue

The government pays attention to elasticity of demand when it selects goods and services on which to levy excise taxes (taxes levied on the production of a product or on the quantity fo the produc purchased). If a $1 tax is levied n a product and 10,000 units are sold, tax revenue will be $10,000 (= $1 X 10,000 units sold).If the government raises the tax to $1.50, but the higher prices that results reduces sales (quantity demanded) to 4000 because demand is elastic, tax revenue will decline to $6000 (= $1.50 X 4000 units sold). So a higher tax on a product that has an elastic demand will b ring in less tax revenue.

In contrast, if demand is inelastic, the tax increase from $1 to $1.50 will boost tax revenue. For example, if sales fall from 10,000 to 9000, tax revenue will rise from $10,000 to $13,500 (= $1.50 X 9000 units). Little wonder that legislatures tend to seek out products such as liquor, gasoline, cigarettes, and phone services when levyingand raising taxes. Those taxes yield high tax revenues.
Excise Taxes and Tax Revenue

The government pays attention to elasticity of demand when it selects goods and services on which to levy excise taxes (taxes levied on the production of a product or on the quantity fo the produc purchased). If a $1 tax is levied n a product and 10,000 units are sold, tax revenue will be $10,000 (= $1 X 10,000 units sold).If the government raises the tax to $1.50, but the higher prices that results reduces sales (quantity demanded) to 4000 because demand is elastic, tax revenue will decline to $6000 (= $1.50 X 4000 units sold). So a higher tax on a product that has an elastic demand will b ring in less tax revenue.

In contrast, if demand is inelastic, the tax increase from $1 to $1.50 will boost tax revenue. For example, if sales fall from 10,000 to 9000, tax revenue will rise from $10,000 to $13,500 (= $1.50 X 9000 units). Little wonder that legislatures tend to seek out products such as liquor, gasoline, cigarettes, and phone services when levyingand raising taxes. Those taxes yield high tax revenues.

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.