Many people fail to see the importance of price elasticity of demand to decisions made in markets. For example, if a product has an inelastic response to price, an increase in the tax on that item doesn’t affect the quantity demanded very much and most of the tax is paid by the consumer in the form of higher prices. For example, governments typically have special excise (sales) taxes on items that have inelastic demand like cigarettes, alcoholic beverages, and gasoline. Though businesses may not be in favor, they are not as vocal in opposition to the extent that a producer of more elastic products like clothes would be.
Can you think of other items that an increased tax would not affect quantity purchased to a large extent? What about required health care? Why is health care not Typically taxed?
Is it appropriate for government to use the economic concept of ElasticityTypically taxed to tax certain items? Why or why not?
Incorporate appropriate relevant biblical principles into your response.
