Related to the Economics in Practice on page 121: Before the imposition of an excise tax on beer, name-brand beer sold for $20 per case and generic beer sold for $12 per case. After the imposition of the tax, name-brand beer sold for $28 per case and generic beer sold for $20 per case. Without the tax, the relative price of the name-brand beer
A) is higher.
B) is lower.
C) did not change.
D) More information is needed to determine the answer.

Question

Quizplus · Accepted Answer

Before the tax, name-brand beer was priced at $20 per case while generic beer was priced at $12 per case. Therefore, the relative price of name-brand beer was higher. After the imposition of the tax, name-brand beer was priced at $28 per case while generic beer was priced at $20 per case. This means that the price of name-brand beer increased by $8 per case while the price of generic beer increased by $8 per case. As a result, the relative price of name-brand beer is still higher even after the imposition of the tax.

Related to the Economics in Practice on Page 121: Before