Question: Use calculus to show that an increase in a specific sales tax reduces quantity less and tax revenue more, the less elastic the demand
Use calculus to show that an increase in a specific sales tax τ reduces quantity less and tax revenue more, the less elastic the demand curve. (Hint: The quantity demanded depends on its price, which in turn depends on the specific tax, Q(p(τ)), and tax revenue is R = p(τ)Q(p(τ)).) M
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