The prices and elasticities for some different types of food are summarised in Table 1. Table 1: Price elasticities of demand for different types of food. Тypical Spending per week (S) Price Elasticity of Demand (in absolute value) Food Calories Categories per serving Price per 100 g (S) Fruit Vegetables 660 0.4 1.13 140 0.35 3.5 0.85 Pasta 1550 0.4 0.88 Bread 950 0.6 2.5 0.29 Snacks 430 1.2 5 0.27 Candy Milk - A 1750 0.7 0.30 2100 0.1 2.5 1.78 Milk - B 880 0.2 1.5 1.98 Government plans to keep people healthy by discouraging consumption of high-calorie food. A 20% excite tax will be imposed on one of the high-calorie food items which contains calories more than 1550 per serving. For three different policy goals: (1) maximization of tax revenue, (i1) maximization of reduction in high-calorie food consumption and (iii) minimization of loss in market efficiency (or deadweight loss), select the best policy choice as your recommendation for imposing the tax. Explain the rationale of your recommendation.

The prices and elasticities for some different types of food are summarised in Table 1. Table 1: Price elasticities of demand for different types of food. Тypical Spending per week (S) Price Elasticity of Demand (in absolute value) Food Calories Categories per serving Price per 100 g (S) Fruit Vegetables 660 0.4 1.13 140 0.35 3.5 0.85 Pasta 1550 0.4 0.88 Bread 950 0.6 2.5 0.29 Snacks 430 1.2 5 0.27 Candy Milk - A 1750 0.7 0.30 2100 0.1 2.5 1.78 Milk - B 880 0.2 1.5 1.98 Government plans to keep people healthy by discouraging consumption of high-calorie food. A 20% excite tax will be imposed on one of the high-calorie food items which contains calories more than 1550 per serving. For three different policy goals: (1) maximization of tax revenue, (i1) maximization of reduction in high-calorie food consumption and (iii) minimization of loss in market efficiency (or deadweight loss), select the best policy choice as your recommendation for imposing the tax. Explain the rationale of your recommendation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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