Opposition will be greater where lost surplus is greater. Thus, producers will mount the greater opposition to the popsicle tax while consumers will be more unhappy with the coffee tax. In addition, the popsicle tax will have greater unemployment consequences than the coffee tax since total consumption falls by more. Producers are likely to be more effective at opposing a tax than consumers since they represent a relatively small group each of which is hurt significantly while consumers are a large group each of which is hurt more modestly. So, for all these reasons it would also be more likely that the coffee tax would stay in place while the political and economic consequences of the popsicle tax would probably cause it to be short lived.
Homework Questions