Using PED in Gov Policy

7.9 of The Economy 1.0 & The Economy #4

When it comes to tax revenues, why should the Gov care about the PED?

-If demand is highly elastic, then a tax will lead to a large fall in sales. Can be intentional if the goal is to reduce consumption of a particular good/service

-If demand is highly inelastic, then the tax will lead to an insignificant fall in consumption. Can be intentional if the goal is to increase tax revenue.

Given this, what may Governments do with this data in terms of taxing?

-Demand for high and low-calorie snacks and candy is very inelastic, thus suggesting that, firstly, the markup is high and secondly, any tax will do little to reduce consumption

-Meanwhile, low-calorie milk will see a huge change in its consumption if a tax is applied.

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