If a soda tax is implemented and demand for soda is price elastic, the effect on discouraging soda consumption would be ________ and ________ tax revenue would be collected than if demand were inelastic.
A)larger; more
B)larger; less
C)smaller; more
D)smaller; less

Question

Quizplus · Accepted Answer

If demand for soda is price elastic, a soda tax would lead to a larger decrease in consumption as consumers are more responsive to changes in price. This would result in less tax revenue collected as overall sales would decrease, but the tax rate remains the same. Therefore, a larger effect on discouraging soda consumption would occur, but less tax revenue would be collected than if demand were inelastic.

If a Soda Tax Is Implemented and Demand for Soda