Governments often to raise revenues to fund public projects

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Governments often need to raise revenues to fund public projects like schools, road maintenance, parks, etc. One way governments raise revenue is to place taxes on the sale of certain goods. Suppose a government is debating whether to raise taxes on the sale of alcoholic beverages (beer, wine and liquor) vs raising tax on hotel rooms. As an economist, you are being asked to weigh in on the debate and answer the question "Which tax will raise more revenue for the government, and why?" Using what you know about elasticities, how would you answer this question?

Reference no: EM13838658

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