In 1995, the Food and Drug Administration (FDA) published new labeling standards for bottled water. (The full
Question:
In 1995, the Food and Drug Administration (FDA) published new labeling standards for bottled water. (The full text of the final rule can be found at http://cfr.vlex.com/vid/165-110-bottled-water-19705533.) Prior to that time, bottlers could sell regular tap water under a bottled water label. In fact, the FDA estimated that approximately 25 percent of the supply of bottled water was nothing more than ordinary tap water. Consider how these tougher standards eliminated 25 percent of the supply of bottled water. If market demand is unaffected, what qualitative impact would this labeling change have on equilibrium price and quantity for bottled water? Support your answer with a graphical model.
Step by Step Answer:
Environmental Economics and Management Theory, Policy and Applications
ISBN: 978-1111826673
6th edition
Authors: Scott J. Callan, Janet M. Thomas