Inverse Elasticity Rule

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August 31, 2024 4 min read Definitions
Inverse Elasticity Rule: Efficient Commodity Taxation
Economics Finance Inverse Elasticity Rule Commodity Taxation Economic Welfare Tax Policy Ramsey Rule
A rule describing efficient commodity taxation in a single consumer economy when there are no cross-price effects in demand, establishing that goods with low elasticities of demand should be taxed highly.
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August 31, 2024 4 min read Definitions
Ramsey Rule: Optimal Commodity Taxes in a Single-Consumer Economy
Economics Finance Ramsey Rule Commodity Taxes Optimal Taxation Single Consumer Economy Inverse Elasticity Rule
The Ramsey Rule, also known as the inverse elasticity rule, characterizes optimal commodity taxes to maximize utility in an economy with a single consumer.
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