Many health economists and public health experts believe that consuming Sugar Sweetened Beverages (SSBs) increases the risk of obesity related illnesses (e. g., Type II diabetes, cancer, etc.) that affects us all through our pooled health insurance system whether we consume SSBs or not (hence, the negative externality). Taxing SSBs is one way of dealing with the negative externality. Imagine a world where the US introduced a tax on SSBs such that a 2-liter of soda cost as much as the average six-pack of beer or bottle of wine (say, around $7.00). 1. Would you continue to buy soda? Why or why not?
2. If not, what would you buy instead?
3. Do you think the potential health benefits would outweigh the potential costs to businesses?
4. What is an alternative way to deal with this negative externality that you think might work better than the tax on SSB?