Explain Why the Concept of Price Elasticity of Demand Is

question 116

Essay

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

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Definitions:

Utility Function

An economic term describing how different goods or services yield different levels of satisfaction or utility to a consumer.

Units

Refers to the individual or measurable components that can be sold, used, or accounted for, in various contexts such as production, inventory, or measurement standards.

Utility Function

A mathematical representation of a consumer's preference ordering over a set of goods and services, showing the satisfaction level from consumption.

Consumption Of X

The act of using up a particular resource X or the amount of X that is used.