Obvious reason is to raise tax revenues for the government

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Governments impose taxes for several reasons. The most obvious reason is to raise tax revenues for the government. If the goal of a government is to raise the maximum tax revenues, should a per unit tax be imposed on an item that has a price elasticity of demand that is elastic or inelastic? A per unit tax is a tax that is charged as so much per unit of the item sold. An example would be a tax of 42 cents per gallon of gas sold. The tax would be 42 cents a gallon no matter if a gallon of gas had price of $2.00 or $4.00. Explain your answer.

Reference no: EM131246488

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