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]
(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]
Everything you need to excel in your exams