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5) There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption. Assume for simplicity that
5) There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption. Assume for simplicity that all bottled soft drinks are the same size. Suppose the initial market equilibrium is P = $2.00 and Q = 1000. (see figure 2 below) a) Refer to Figure 2. Suppose the government imposes a tax of $0.60 per soft drink purchased. The price paid by the consumer becomes = b) Refer to Figure 2. Suppose the government imposes a tax of $0.60 per soft drink purchased. The after-tax price received by the seller becomes = c) Refer to Figure 2. Suppose the government imposes a tax of $0.60 per soft drink purchased. The government total tax revenue from sales of soft drinks is = d) Refer to Figure 2. Suppose the government imposes a tax of $0.60 per soft drink purchased. 'When it comes to the economic incidence, who is bearing the tax burden, buyers, or sellers? Explain using actual numbers. Figure 2
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