Question
You are a government official. You want to impose a sin tax on liquor to dissuade how much liquor people consume. a) If liquor has
You are a government official. You want to impose a "sin" tax on liquor to dissuade how much liquor people consume. a) If liquor has inelastic demand, how much will the tax cause liquor sales to fall? (Note: I am not looking for an actual number but tell me if sales would fall a lot or a little or not at all and explain your reasoning.) b) Continue to assume that liquor has inelastic demand. Who will end up paying much of the tax - consumers or the liquor makers? Explain. c) Finally, will this tax raise a lot of revenue or little revenue? Explain.
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