UK Government Imposes Sugar Tax to Combat Obesity
TITLE
In 2018 the UK government, concerned about the rise in obesity, particularly amongst young people, imposed a tax on producers of sugar💥sweetened drinks.
ESSAY
🌟Title: Impact of Sugar💥Sweetened Drinks Tax on Obesity in the UK🌟
🌟Introduction🌟
In response to the rising concern of obesity, particularly among young people, the UK government imposed a tax on producers of sugar💥sweetened drinks in 2018. This essay will explore the concept of demerit goods, the rationale behind taxing them, and how such a tax can improve the allocation of resources in the market for sugar💥sweetened drinks.
🌟Understanding Demerit Goods🌟
A demerit good is a product that has a cost of consumption underestimated or is worse for the consumer than they realize due to information failure. This results in overconsumption of such goods, leading to negative externalities, in this case, health issues related to obesity.
🌟Impact of Tax on Producers of Sugar💥Sweetened Drinks🌟
A tax imposed on producers of sugar💥sweetened drinks effectively increases the cost of production for these goods. The diagram below illustrates the impact of an indirect tax on the market:
Diagram:
💥 Show a left shift in the supply curve
💥 Demonstrate the fall in quantity consumed
💥 Illustrate the increase in price
🌟Explanation🌟
The leftward shift in the supply curve indicates that producers now face higher production costs due to the tax. As a result, the price of sugar💥sweetened drinks increases, leading to a decrease in the quantity consumed. This decrease in consumption helps to address the market failure associated with overconsumption of demerit goods caused by information failure.
🌟Conclusion🌟
In conclusion, the taxation of sugar💥sweetened drinks aims to correct the market failure linked to the overconsumption of demerit goods like sugary beverages. By raising the price and reducing consumption, this tax helps to improve resource allocation and combat issues such as obesity. Through effective policy interventions like taxation, governments can play a crucial role in promoting public health and addressing market failures associated with demerit goods.
SUBJECT
ECONOMICS
PAPER
A level and AS level
NOTES
In 2018, the UK government responded to the increased rates of obesity, particularly among young people, by implementing a tax on producers of sugar💥sweetened drinks.
A demerit good is a type of good that is more harmful for the consumer than they realize due to information failure. This results in overconsumption of the good.
With the aid of a diagram illustrating the market for sugar💥sweetened drinks, the impact of an indirect tax on producers can be explained. The diagram should demonstrate a leftward shift in the supply curve, leading to a decrease in the quantity consumed and an increase in price.
The tax imposed on producers raises their production costs, causing an increase in price and a reduction in consumption. This mechanism helps address the problem of information failure and enhances the allocation of resources in the market for sugar💥sweetened drinks.