Researchers have found that the price elasticities for food

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In Thailand, researchers have found that the price elasticities for food, alcohol, and telecommunications are -.10, -.84, and -.025, respectively.

a. If the goal is to raise tax revenues with the least excess burden possible, what should should be the tax rate on alcohol and telecommunications, when the tax rate on food is fixed at 1% (assuming that the goods are unrelated in consump- tion)? Explain your answer.

b. Now if the government wants to combat alcohol addiction, how would your answer to (a) change?

Reference no: EM131101501

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