PED = measures the responsiveness of quantity demanded to a change in price, along a given demand curve.
Indirect Tax = is a tax placed on the producer (his produced goods and/or services) which is then (partly) passed on to the consumer in a form of a higher price.
An indirect tax will raise the price of a good causing the supply curve to shift left and the Qd to decrease, there is a loss of Consumer Surplus and producer Surplus and DWL
Understand that the more inelastic the demand, the people buying the good will still purchase much of it even when the price increases. This implies that if the government is trying to gain revenue by the imposition of the indirect tax it would do well to tax goods that have an inelastic price elasticity of demand.
If the government is trying to stop people from consuming a product such as taxes, and the cigarettes demand is very inelastic the indirect tax must be higher than if the good has a very elastic demand to get people to forego consumption.
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