Question

Use separate diagrams of your choice to illustrate and answer the following:

Should policy makers introduce a new tax to combat a ‘bad’ behaviour (like for example trying to combat obesity by introducing a sugar tax) or instead use some form of ‘nudging’? If so, how? If not, why not? Provide a real-life examples (other than the sugar tax mentioned above) when making your case.

Answer 1

Policy makers should introduce a tax to combat a bad behaviour because imposing tax will make people to realise what they are doing which is harmful for you and as well as whole society .

Lets take example of enviornment tax . because today problem of pollution or enviornment degradation is most dangerous for our present society as well as  future society.

first why enviornment taxes ?

1) Taxes can directly address the failure of market and polluters to take enviornment impact into account by incorporating these impacts into prices .

2) These Taxes enable us to develop efficient technology to combat enviornment degardation .

3) Enable us to provide some cushion for the fiscal target . and also generate some revenue which can we use for welfare of poor people .

How

1) if we impose some tax on the polluter industry which will result in high price of thier product ultimatly consumer will shift toward low price .

2) These taxes enables to give incentives to ecofriendly producer .

3) Taxes also enables as to provide subsidy to the those producer which is ecofriendly .

All these incentives, subsidy, shift of consumers will prompt to pollutor to shift toward ecofriendly practices .