Question

How is the concept of elasticity of demand important to the government?

Answer 1

1:Elasticity of demand measures the ratio of the proportionate change in quantity demanded of a commodity to proportionate change in price. Concept of elasticity of demand is important to the government as it helps the government to formulate tax policies.
2:Price elasticity of demand is the change in demand of a product based on the increase or decrease of the price of that product. It is of significant importance to the government because it is used to determine the tax incidence of each product.