question archive For a tax on sugar or fat to reduce the consumption of fattening foods and drinks by a very large amount, what elasticities should the demand and supply curves have? (unitary elastic, elastic, or inelastic)
For a tax on sugar or fat to reduce the consumption of fattening foods and drinks by a very large amount, what elasticities should the demand and supply curves have? (unitary elastic, elastic, or inelastic)
Subject:EconomicsPrice:2.88 Bought3
For a tax on sugar or fat to reduce the consumption of fattening foods and drinks by a very large amount, what elasticities should the demand and supply curves have? (unitary elastic, elastic, or inelastic)
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The demand curve should be unitary elastic while the supply curve should be perfectly elastic.
This combination of elasticities of demand and supply causes that consumers need to absorb all tax as any change in price producers receive makes that they no longer want to supply goods in this market. The quantity of goods purchased by consumers will fall because they want to consume less goods at a price that is increased due to imposed rax.
