Journal of

Marketing Development and Competitiveness

Scholar Gateway

Abstracts prior to volume 5(1) have been archived!

Issue 5(1), October 2010 -- Paper Abstracts

Girard  (p. 9-22)

Cooper (p. 23-32)

Kunz-Osborne (p. 33-41)

Coulmas-Law (p.42-46)

Stasio (p. 47-56)

Albert-Valette-Florence (p.57-63)

Zhang-Rauch (p. 64-70)

Alam-Yasin (p. 71-78)

Mattare-Monahan-Shah (p. 79-94)

Nonis-Hudson-Hunt (p. 95-106)

JOURNAL OF APPLIED BUSINESS AND ECONOMICS

Excise Taxes and the Stability of Price Elasticity

Author(s): Ralph C. Gamble, Rory Terry, Dosse Toulaboe

Citation: Ralph C. Gamble, Rory Terry, Dosse Toulaboe, (2011) "Excise Taxes and the Stability of Price Elasticity," Journal of Applied Business and Economics, Vol. 12, Iss. 5, pp. 80 - 99

Article Type: Research paper

Publisher: North American Business Press

Abstract:

When demand is linear, and supply is perfectly elastic, tax revenue is maximized at a per-unit tax that

causes demand elasticity to increase to twice its initial value, plus one. This is termed the 2+1 rule. This

paper shows that the 2+1 rule also applies to classes of nonlinear demand functions, thus justifying the

assumption of demand-function linearity for tax-revenue maximization in these cases. We also

demonstrate that while optimal tax revenue and price elasticity of demand are inversely related, it is not

necessarily best from a tax-revenue maximization perspective to tax the lower elasticity good.