Which one of the following changes would be most likely to reduce the consumption of sugary energy drinks by teenagers: a subsidy to firms, an indirect tax,...

Assessment: Economics 9214 | Paper 1 Mock 01 | Written Paper 1 Subject: Economics - 9214

Question 1 Report

Which one of the following changes would be most likely to reduce the consumption of sugary energy drinks by teenagers: a subsidy to firms, an indirect tax, a fall in wages, or free advertising?

(a) State the policy from the list that the government should use. [1]
(b) Explain how this policy changes the price paid by consumers. [1]

Answer Details

(a) The appropriate policy is an indirect tax. [1]

(b) An indirect tax raises firms' costs of supplying sugary energy drinks. Firms are therefore likely to raise the market price paid by consumers, discouraging consumption. [1]

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