West Virginians who live near the border with other states can shop on either side of the border. When a 6% food tax was imposed in West Virginia, if West Virginians bought food in West Virginia, their total cost was the price of the food plus the tax. If they bought across the border in states that

Question

West Virginians who live near the border with other states can shop on either side of the border. When a 6% food tax was imposed in West Virginia, if West Virginians bought food in West Virginia, their total cost was the price of the food plus the tax. If they bought across the border in states that do not tax food, the total cost was the price plus the cost due to the extra travel. Tosun and Skidmore (2007) found that West Virginian food sales dropped 8% in border counties when a 6% sales tax on food was imposed.Explain why. West Virginia eliminated the tax in 2013. (Hint: See the Challenge Solution.)

Accepted Answer

After West Virginia imposed a food tax, it was less expensive to buy food across the border for those people who lived close to the border. After the tax rose, people who live farther from the border started going to other states to buy their food. You
can illustrate this effect using a diagram similar to that in the Challenge Solution.

Question 3.6.2: West Virginians who live near the border with other states c...

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