Elasticity of Demand and Tax Revenue
A government imposes a tax on plastic bags to reduce pollution. Which of the following outcomes indicates the highest price elasticity of demand for these bags?
A
Quantity demanded remains unchanged, leading to increased tax revenue.
B
Quantity demanded decreases slightly, and tax revenue meets expectations.
C
Quantity demanded decreases significantly, causing tax revenue to be lower than expected.
D
Consumers switch to paper bags, resulting in no change in overall shopping bag consumption.
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