Decrease in the value added tax on restaurants

Reference no: EM13690250

The French government decreased VAT (value added tax) on restaurants in November 2008 from 19.6 percent to 5.5 percent. However, an estimate shows that consumer prices have only decreased by 1.9 per cent. Using your knowledge of demand/supply elasticity’s, explain why this can happen, and who are the likely winners and losers from the decrease in the value added tax on restaurants. Use graphs to support your answer.

Reference no: EM13690250

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Decrease in the value added tax on restaurants : The French government decreased VAT (value added tax) on restaurants in November 2008 from 19.6 percent to 5.5 percent. However, an estimate shows that consumer prices have only decreased by 1.9 per cent.

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