Answer to Question #298218 in Microeconomics for Tf.com

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?

The government has policy objective of changing the consumption behavior of citizens by taxing food?

Answer 1

When the government raises the taxes on food, this does not affect the consumers behavior of consumption. This is because foods are essential products that are necessary hence must and will be consumed irregardless of the prices. Therefore the government can not change the consumers behavior of food consumption by imposing higher taxes.