In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a tax on sugary soft drink sales. Which of the following statements is true?
A) Given the numerous alternatives, consumers' demand for sugary soft drinks is relatively elastic and the tax will likely work to discourage sugary soft drink consumption.
B) The tax on sugary soft drinks will likely raise considerable revenue, but will be unlikely to reduce the consumption of sugary soft drinks by consumers.
C) The tax on sugary soft drinks will likely decrease the demand for sugar-free soft drinks.
D) Taxes do not discourage consumers from consuming products.

Question

Quizplus · Accepted Answer

The demand for sugary soft drinks is relatively elastic due to the availability of numerous alternatives (like water, sugar-free soft drinks, and other non-sugary beverages), meaning consumers are likely to reduce their consumption in response to a price increase caused by the tax.

In Order to Discourage Consumers from Consuming Sugary Soft Drinks