n recent years, a number of cities have passed taxes on carbonated sodas to help

Question

n recent years, a number of cities have passed taxes on carbonated sodas to help reduce obesit Source: Anahad o'Connor and Margot Sanger-Katznov, "As Soda Taxes Gam Wider Acceptance, Y If this forecast is correct, is the demand for premium bottled water likely to increase or decrease?E O A. Increase, because premium bottled water and carbonated sodas are substitutes O B. Increase, because premium bottled water and carbonated sodas are complements O C. Decrease, because premium bottled water and carbonated sodas are substitutes 0 D. Decrease, because premium bottled water and carbonated sodas are complements

Explanation / Answer

The correct answer is A

Explanation:- When tax is imposed on carbonated sodas, the price of carbonated sodas will increase and as a result the demand for carbonated sodas will decrease. Consumers would buy more premium bottled water which can be consumed instead of carbonated sodas. Thus the demand for premium bottled water increases.

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