Question

What might be true if the government levied a 40% excise tax on alcohol? select all that could apply. correct answer(s) alcohol has a perfectly elastic demand. alcohol is not popular. alcohol has a highly inelastic demand. the government wants people to drink less?

Answer 1

There are two correct options from all the available ones in the question: alcohol has a highly inelastic demand and the government wants people to drink less.

A highly inelastic demand refers to an economic situation where demand for a product does not increase or decrease event though price rises or falls – even though the demand quantity for alcohol might fall, the total revenue will still be the same.

The second option is also correct since if the government levies a 40% tax on alcohol, they probably want the citizens to stop consuming them so much.