A bill is before your state legislature to increase the sales tax on beer.The legislator with whom you intern has argued that this tax will decrease beer consumption significantly,and has asked you to provide economic analysis to back him up.You will be able to support this tax as a way to decrease beer consumption

Question

Quizplus · Accepted Answer

The intern can only support the argument if they find that the demand for beer is price elastic. If demand is price inelastic, then the increase in price may not result in a significant decrease in consumption. If demand is income elastic, then the increase in price may not affect consumption at all, since those who continue to buy beer may view it as a luxury good. Therefore, the best choice is B.

A Bill Is Before Your State Legislature to Increase the Sales