Question
A state in the southeastern region of the United States operates state liquor stores. Prices at the stores are set in the following fashion: add
A state in the southeastern region of the United States operates state liquor stores. Prices at the stores are set in the following fashion: add 41% to the wholesale price at which the system acquires the product. To that is added an excise of $8.10 per case. The state sold roughly 36 million cases. The state, however, increases the excise rate to $9.10 per case, and a tentative revenue estimate shows that excise revenue will increase by $36 million. The state economist objects: The demand for liquor is inelastic, so sales will be relatively insensitive to a tax increase. Therefore, revenue will increase by more than $36 million. What is your reaction to this objection?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started