Answer to Question #298217 in Microeconomics for Kayden

Question

You have been contacted as a policy expert to very briefly, advice government to institute food tax policy based on the following policy objectives:

The government has the policy objective of raising tax revenue on foods?

Answer 1

Even though taxing foods will help the government in attaining the contractionary government policy, it is likely to increase the cost of food. Therefore, the government should ensure not to tax food stuff heavily because it will significantly affect those in the low-income families in the society.