Supply and Demand
Suppose that you are a governmental official who is responsible for making a recommendation on one good or service to be subject to a per-unit sales tax. Your boss, and elected official, told you to consider taxing widgets and fisbins sell for about $7.32 each. Suppose further that the price elasticity of demand for fisbins is $7.50. Also suppose that the price elasticity of demand for widgets is $0.02. If the government is interested in earning as much revenue as it can from tax, would you recommend the $0.32 tax to be on fisbins or widgets? Fully explain.