A government put in place a tax on soft drinks that contain sugar. It was predicted that this tax would generate £520m each year for the government. In fact, the amount of tax collected was only £240m. What is the most likely explanation for why the tax revenue was below the forecast?
- Aa specific tax instead of an ad valorem tax was introduced
- Bfewer drinks than originally forecast contained sugar
- Cmost retailers did not increase the price of soft drinks
- Dthe demand for soft drinks was price inelastic