Suppose that the equilibrium price of 2-liter bottles of soda is $4. The government wants to...

 

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Suppose that the equilibrium price of 2-liter bottles of soda is $4. The government wants to decrease the consumption of soda and levies a tax of $2 on each unit sold. If the demand for 2-liter bottles of soda is relatively inelastic, what do we expect the new price paid by consumers to be? Briefly explain your answer. (Hint: there is a range of correct answers). Suppose that the equilibrium price of 2-liter bottles of soda is $4. The government wants to decrease the consumption of soda and levies a tax of $2 on each unit sold. If the demand for 2-liter bottles of soda is relatively inelastic, what do we expect the new price paid by consumers to be? Briefly explain your answer. (Hint: there is a range of correct answers).

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We can expect the price paid by consumers to increase to ... View the full answer