Would expect a sin tax that raises the price of crack 15%

Reference no: EM13936254

A second reason the government may impose a tax is to reduce consumption of a good. Such taxes are known as sin taxes. Some argue that we should make some drugs legal and tax them in order to raise tax revenues for the government. The government has decided to place a sin tax on crack. Given what you know about the price elasticity of demand and addictive properties of crack, would you expect a sin tax that raises the price of crack by 15% to decrease the sale of crack by more than or less than 15%? Explain your answer.

Reference no: EM13936254

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