1. Using the utility-maximizing rule, illustrate how consumers who are affected by the soda tax policy make choices to achieve an optimal decision. Many countries have started imposing a tax on soda beverages as a measure to raise revenue as well as to prevent obesity. You may expect that as the taxes reduce soda beverage consumption, the revenue raised would also decrease.

However, the government tax policy is always effective; this is because either the tax effectively reduces soda beverage consumption or if the consumption doesn’t decrease, the government raises huge revenue from the tax. From an economist’s perspective the impact of this tax is not only appealing but also a reflection of a significant policy question