Suppose the Government Increases the Tax on Petrol in Order

question 84

Multiple Choice

Suppose the government increases the tax on petrol in order to raise revenue.Since raising the petrol tax would increase the price of petrol, the government must be assuming that the:

• A)demand for petrol is price elastic
• B)demand for petrol is price inelastic
• C)demand for petrol is price unit elastic
• D)tax on petrol will not affect the consumption of petrol

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Definitions:

Plant and Equipment

Tangible long-term assets owned by a firm, used in the production or supply of goods and services, such as machinery and buildings.

Functional Currency

The primary currency used by a business or entity in its operations and financial reporting.

Translation Rate

The exchange rate used in translating the financial statements of a foreign entity into the functional currency for reporting purposes.

Functional Currency

The currency of the primary economic environment in which an entity operates, typically used in preparing financial statements.