Question

The price elasticity of demand for soft drinks has been estimated to be 0.55. if the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacturing), how will that affect total expenditures on soft drinks, all other things equal

Answer 1

It definitely would be bad for most people. It would increase the price on a very common item that the majority of the population consumes and that would be harmful to the economy in an important aspect of the economy. It might also even limit the diversity of flavors and brand innovation.