When governments wants to discourage consumption, they tax goods whose demand is
- price inelastic
- abnormal in nature
-
price elastic
- normal in nature
The correct answer is: C
Explanation
Taxation reduces the purchasing power of the people and it reduces their consumption. The decline in consumption leads to decrease in effective demand for the goods and services, which in turn affects the production of these commodities.
Government tax goods whose price is elastic. This means that, when there is an increase in price as a result of high taxation, the quantity demanded of the goods will reduce.