In England, the tax on soft drinks was recently introduced.
Australians buy 1.29 billion litres of sugar-sweetened drinks per
annum. Currently, the average price of these drinks is $1.7/litre.
Assume that government wants to implement a sales tax (x% per
litre) on soft drinks to reduce their sales (or demand) to 700
million litres. The price elasticity of demand for soft drinks is
-0.89.
a) How much sales tax should be imposed to achieve the demand
target of 700 million litres? Hint: Find the value of x.
b) How much additional revenue will be raised by this tax?
In England, the tax on soft drinks was recently introduced. Australians buy 1.29 billion litres of sugar-sweetened drink
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