In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?
A) Given the numerous alternatives, consumers' demand for fast food is relatively inelastic and the tax will not likely work to discourage fast food consumption.
B) The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers.
C) The tax on fast food will likely increase the demand for home cooked meals.
D) A tax on fast food will only be effective if demand is perfectly inelastic.

Question

Quizplus · Accepted Answer

A tax on fast food can make it more expensive, potentially leading consumers to seek cheaper alternatives like home-cooked meals, thus increasing their demand.

In Order to Discourage Consumers from Eating Unhealthy Fast Food