Case Study

Evaluating Tax Policy Effectiveness

A government is considering two separate tax proposals aimed at improving public health by reducing consumption. Proposal A is a tax on all sugary soft drinks, a product category with many alternative beverage options. Proposal B is a tax on a specific life-saving prescription medication for which there are no substitutes. The government's primary objective is to achieve the largest possible reduction in the quantity consumed for the targeted product. Which proposal should the government choose to better meet its primary objective? Justify your choice.

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Updated 2025-10-07

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