Question

Discussion (for AND against) on sugar taxes, including why from an economic perspective they may or may not work. Evidence of whether such policies have been tried elsewhere, and whether they have worked successfully should also be discussed.

(600 words) and any diagrams worth using?

Answer 1

Sugar taxes is being imposed on sugary drinks. As consumption of sugary drinks is the leading cause of obesity in UK and other major countries, this tax would certainly put the usage and consumption to a lesser extent. Sugar tax would definitely work for the price sensitive people and the middle class population whose demand is quite price elastic. With every single penny increase in the price of sugary drinks would bring down the level of consumption and thus would discourage the further consumption and thus it is effective.

Moreover, the consumers who are quite habituated to sugary drinks, the imposition of tax would not bring any such difference and would continue with the same level of consumption. As it is made out of habit and not any other case, so it is difficult to cut down the consumption.

UK has recently put a tax on sugary drinks at a rate of 24p on sugary drinks containing 8g of sugar per 100 ml and a tax of 18p for a sugary drink containing 5-8 g of sugar per 100 ml. This came to be quite successful in bringing down the consumption of sugary drinks for the price sensitive customers.

This is as per the Law of Demand. As the price of sugary drinks increases, the demand and consumption of the sugary drinks come down.

As the price of sugary drinks increases, due to imposition of taxes, the quantity demanded and consumed reduces. This is applicable based on price elasticity. As the price increases more, there is proportionate less reduction in quantity demanded.