In England, the tax on soft drinks was recently introduced. Australians buy 1.29 billion litres of sugar-sweetened drink
Posted: Mon Apr 25, 2022 8:12 am
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?
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?