Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate?

Question

Quizplus · Accepted Answer

The principle illustrated is that people respond to incentives. In this case, the incentive is the lower cost of beer in surrounding states due to the tax increase in Rhode Island, leading consumers to change their purchasing behavior to save money.

Suppose the State of Rhode Island Passes a Law That