Question
After learning that consumption of energy drinks (for example, Red Bull) by high school students has been associated with a variety of negative health outcomes,
After learning that consumption of energy drinks (for example, Red Bull) by high school students has been associated with a variety of negative health outcomes, the principal of Rancho Cotate High School is alarmed to learn that her 2,000 students collectively purchase 8,000 energy drinks on campus each week. In order to reduce this consumption, she is considering imposing a fee on energy drink sales on campus. This fee would increase the price of energy drinks by 16%, from $2.50 per can to $2.90 per can. The price elasticity of demand for energy drinks is -1.3 at Rancho Cotate. What percentage reduction in the quantity of energy drinks purchased should she expect to result from this fee?
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