April 15, 2015
Deciding whether they want revenue, prohibition or smuggling, lawmakers have to decide how high to make sin taxes on items like cigarettes.
Deciding whether they want revenue, prohibition or smuggling, lawmakers have to decide how high to make sin taxes on items like cigarettes.
This week's everyday economics stories include subsidies, human capital, game theory, price controls, inelastic demand, and monopolistic competition.
To avoid inelastic demand, a sugary drink tax would need to increase price substantially. Current taxes that average less than 5% have little impact.
Unpredictable human behavior for Colorado marijuana sales is but one example of why economic forecasting for tax revenue and GDP is inaccurate.
For 350 years, the Russian government has optimized the money it gets from vodka sales by creating a monopoly that takes advantage of inelastic demand.