10. Government pays attention to the elasticity of demand when selecting foods and services upon which to levy excise taxes. Assume a $1.00 tax is levied on some good and 10,000 units are sold.

a. What is the tax revenue collected?

Now, assume the government raises the tax to $1.50. This causes sales to decline to 5,000 units

. b. Calculate the price (tax) elasticity of demand.

c. Is it elastic, inelastic, or unit elastic?

d. What happens to total tax revenue?

e. Based on your elasticity coefficient, is the change in total tax revenue consistent with what you would expect to happen? Explain why or why not.