Recently there has been discussion in the news about taxing junk food (soft drinks, for example) in an effort to reduce the incidence of obesity in the U.S. Do you think the demand for junk food is elastic or inelastic with respect to price?

The demand is inelastic in terms of price. People would consume junk food when the prices are high but the decrease in the demand is smaller in comparison to the price rise. Because the replacement of junk food is difficult.

Due to inelasticity, there is low inefficiency in the industry because the quantity demanded is approximately the same throughout.

Thus it's a good idea to tax junk foods particularly to increase the revenue of government but the taxes implemented on food might change the mentality of people resulting in the substitution of the food.