An increase in the size of a tax is most likely to increase tax revenue in a market with
A)elastic demand and elastic supply.
B)elastic demand and inelastic supply.
C)inelastic demand and elastic supply.
D)inelastic demand and inelastic supply.

Question

Quizplus · Accepted Answer

In a market with inelastic demand and inelastic supply, consumers and producers are less responsive to changes in price, meaning that they are more willing to pay or accept higher prices. Therefore, an increase in the size of a tax is more likely to result in an increase in tax revenue in this type of market. In markets with elastic demand or supply, consumers and producers are more sensitive to price changes, and a tax increase may cause a significant decrease in demand or supply, leading to a decrease in tax revenue.

An Increase in the Size of a Tax Is Most