A big tax on sugary drinks in Mexico has cut consumption. Sellers passed on the entire tax in higher prices. The largest consumers of sugary drinks are the poor who suffer from diabetes and obesity.

What can we say about the incidence of Mexico’s tax on sugary drinks and what can we infer about the elasticities of supply and demand for these drinks? Would this tax be a progressive tax or a regressive tax? On the basis of what principle would this tax be fair?