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The government wants to implement a policy to reduce the amount of sodas or pops (carbonated, sugary beverages) people drink. Suppose that a $1 tax
The government wants to implement a policy to reduce the amount of sodas or pops (carbonated, sugary beverages) people drink. Suppose that a $1 tax per unit is imposed on all these beverages. Suppose also that the price elasticities of demand for both Coke and Pepsi are equal to one, but that the price elasticity of supply is greater than one for Coke and less than one for Pepsi. For which of these beverages does consumption fall the most after the tax is introduced and for which one does the tax raise the most revenue? Illustrate your answer with a diagram
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