Q.Explain briefly why the government generally prefers to levy commodity (indirect) taxes on goods such as petrol and tobacco rather than on goods with highly elastic demand.

This connects the taxation application of elasticity directly to the definition of inelastic demand.

A commodity (indirect) tax raises the market price of the taxed good. The REVENUE the government actually collects depends on how much quantity sold falls in response to that price rise — which is precisely what price elasticity of demand measures.

Petrol and tobacco both have relatively inelastic demand in practice: petrol has few genuine substitutes for most vehicle users in the short run, and tobacco is a habitual/addictive commodity for many consumers (both are factors from Section 9 that push demand toward inelasticity). Because demand is inelastic, when the tax raises their price, the QUANTITY sold falls only a little — so the government collects tax on almost the same volume of sales as before, maximising total tax revenue. …