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The local government is considering imposing a revenue-neutral (tax revenue would be the same in eithercase) 6.25% tax on either tanning beds or soft drinks. Tanning has an elasticity of demand = ?d = -0.9,while soft drinks' ?d = -0.7. Assume the supply curves have the same elasticity; from an economist's perspective, which good should be taxed and why?

 

 

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91520055

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