Multiple choice

If the main objective of the government is to raise revenue, it should tax commodities with

  1. high elasticity of demand

  2. low elasticity of supply

  3. low elasticity of demand

  4. high income elasticity of demand
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C Correct answer
Explanation

When the government's main objective is to raise revenue, it should tax commodities with low elasticity of demand. This is because consumers will continue to purchase these goods even when prices increase, leading to stable tax revenue. High elasticity demand would cause significant consumption reduction, reducing total tax collected.

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