The economics of soda and pizza.
1) Do you think that consumers would respond equally to an 18% tax on both soda and pizza? i.e., do you think the tax will dissuade soda and pizza consumption equally? Would consumers be more likely to pay the tax for one product and avoid the other?
2) Which tax (soda or pizza) do you think will raise more revenue for the government? Which types of products do we frequently see unique taxes for (not just sales taxes on all products in general, but specific to a type of product)?
3) How does elasticity factor into this discussion? If you wanted to cut people’s caloric intake, would you place a tax on a product whose demand is elastic or inelastic? If you were the government wanting to raise tax revenue, would you tax a product whose demand is elastic or inelastic?
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