A convenience store owner in Philadelphia was worried that the implementation of the 1.5 cents per ounce tax on sweetened beverages would cause the quantity demanded to fall by so much that he would be in a worse situation if he passed the tax on to customers by raising prices than if he did not raise prices.If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened beverages, the demand for sweetened beverages is
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question

Quizplus · Accepted Answer

If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened beverages, it means that the price increase led to a decrease in the quantity demanded, and the demand for sweetened beverages is responsive to changes in price. In other words, the demand curve for sweetened beverages is relatively flat, meaning that a small price increase causes a relatively large decrease in the quantity demanded. This suggests that the demand for sweetened beverages is elastic, and the convenience store owner would be wise not to pass on the tax by increasing prices.

A Convenience Store Owner in Philadelphia Was Worried That the Implementation