Tax on Milk?

Question

If the tax on milk were increased, would it result in your buying fewer cookies? Why do you think so? Explain by giving reasons.

Answer 1

Tax on milk means it cost more $ to buy the same volume of milk.

If you drink your milk while eat your cookies at the same time, in other words, the two goods are compliments - support one another. In other words, you only eat cookies by dipping them in milk, if so, then a tax on milk means that it is more expensive to buy milk.

You will buy less milk, and with that relationship, it translate to that you will buy less cookies (since you only eat cookies with milk and price of milk has increased), so you buy less cookies.

Answer 2

Assuming cookies and milk are COMPLIMENTARY products, then yes an increase in tax on milk would result in fewer cookies being bought.
This is the very basis of complimentary goods. The increase of milk tax represents an upward shift in the supply curve for milk. This results in a downward shift in the demand curve for cookies as people consume less milk - and so need less cookies.

Answer 3

Here in Iowa, there is no tax on milk, but there is tax on cookies (candy...you know...the good stuff). If they taxed the milk, it would not change my milk or cookie buying habit. This is one squirrel that will not go without its milk and cookies.

Answer 4

Here in California, there is no sales tax on food products.

Answer 5

The cost of raising your kids would increase.

Answer 6

I'm lactose intolerant, so it wouldn't affect me.