government is considering placing a tax on alcohol consumption (demand-side) with the goal of raising revenue in order to finance health care benefits such as Medicare. People who support the tax argue that the demand for alcohol is price inelastic in the short-run. Which of the following statements is true? a.This is a very good way to raise revenue both in the short term and in the long term because there are no substitutes for alcohol. b.No tax revenue can be raised in this way because alcohol sellers will just lower their price by the amount of the tax, and therefore the consumer price of alcohol will not change. c.This tax will not raise much revenue either in the short term or the long term because demand is price inelastic. d.The alcohol tax will raise a lot of revenue in the short-run, but it may not raise as much revenue in the long-run since people will substitute away from alcohol, making the long-run demand for alcohol more elastic.

government is considering placing a tax on alcohol consumption (demand-side) with the goal of raising revenue in order to finance health care benefits such as Medicare. People who support the tax argue that the demand for alcohol is price inelastic in the short-run. Which of the following statements is true? a.This is a very good way to raise revenue both in the short term and in the long term because there are no substitutes for alcohol. b.No tax revenue can be raised in this way because alcohol sellers will just lower their price by the amount of the tax, and therefore the consumer price of alcohol will not change. c.This tax will not raise much revenue either in the short term or the long term because demand is price inelastic. d.The alcohol tax will raise a lot of revenue in the short-run, but it may not raise as much revenue in the long-run since people will substitute away from alcohol, making the long-run demand for alcohol more elastic.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 16E: Who would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the...

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