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CFA Level 1
Economics

Impact of Tax on Sugary Drinks Consumption

Hard Microeconomics Elasticity

Suppose a local government is considering implementing a tax on sugary drinks with the aim of reducing their consumption. The government estimates that the price elasticity of demand for sugary drinks is -0.4, while the price elasticity of supply is 0.6. Assuming this tax is imposed, what is the likely impact on the quantity consumed of sugary drinks?

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