Government is known to utilize a product's elasticity measures to set taxes and subsidies. Use this information to set policy on one of the following products: tobacco products, petroleum products, agriculture products, or medical products according to your goal. Research the government's tax/subsidy policy in these areas and any objectives of the tax policy. State your goal, your prescribed action, and why you believe it will work using the information you found.

The government analyzes the elasticity of a product before implementing policies related to taxes and subsidies. Elasticity means the sensitivity of demand due to changes in prices. A perfect example is a 5% tax increase on petroleum products. The demand for petroleum products is relatively inelastic. This means that an increase in taxes that raises price will affect demand but at a lower rate than the % increase in price. That makes it an effective way to increase tax revenue, but it will not do much to reduce consumption and encourage other forms of transportation like the bus or subway. Nor will it do much to reduce the negative externalities like pollution since gas consumption will not drop much.

The government has found a way to encourage the use of greener energy products like solar panels and hybrid cars with subsidies that reduce the price of buying them. Demand for these products is more elastic than the demand for gas or petrol. so cutting the price with a subsidy will increase demand as consumers like getting a bargain price and living a greener lifestyle at the same time. At the same time, demand for petroleum products will fall as users of these products will buy less gasoline and heating oil.