Question

Why did the proposed federal soda tax fail to become law?

a) The imposition of the soda tax would not improve public health.
b) The imposition of the soda tax would not raise sufficient revenue.
c) The soda industry lobbied against it.
d) The president vetoed the tax.

Answer 1

If the soda tax is reduced, it would increase the supply of sodas, lower the price, and increase the quantity. Graphically, this can be shown by a rightward shift of the supply curve.

Step-by-step explanation:

A reduction in the soda tax would likely increase the supply of sodas and decrease the equilibrium price, while also increasing the equilibrium quantity.

When the tax on sodas is reduced, it becomes cheaper for sellers to produce and sell sodas. This incentivizes them to increase their supply, leading to a rightward shift in the supply curve. As a result, the equilibrium price is lowered, and the equilibrium quantity increases.

Graphically, this can be represented by a rightward shift of the supply curve, causing it to intersect with the demand curve at a lower price and a higher quantity.