Question

One in five adults is obese in wealthy countries around the world. Unfortunately, in the United States, the rate is about two in five (Organisation for Economic Cooperation and Development [OECD] 2017). Major causes appear to be sweet drinks and added sugars in other products. According to the Centers for Disease Control and Prevention (2017), frequent consumption of sweetened beverages is associated with obesity, heart disease, kidney diseases, cavities, and other diseases. Oddly, despite the obesity epidemic, subsidies for crops that can be refined into sugar- corn, wheat, rice, sorghum, and others-continue. The subsidies reduce the prices of products containing sugars. These products include sodas, sweetened teas, and other products. A number of local governments have enacted taxes on sweetened beverages, but no taxes have passed at the state or federal level. (France and Mexico have passed national taxes.) Paarlberg, Mozaffartian, and Micha (2017) argue that a 17 percent tax on sweetened beverages would reduce consumption by 15 percent.

Discussion Questions

1. What price elasticity does the estimate by Paarlberg, Mozaffartian, and Micha (2017) imply?

2. Can you find another estimate of the price elasticity of demand for sweetened drinks? (look for published work)

3. Is the demand for sweetened drinks elastic or inelastic?

4. Per question (1) above, If the price of sodas rose by 5 percent, how much would sales drop?

5. What are substitutes for sweetened drinks?

6. Can you find an estimate of the cross-price elasticity of demand for sweetened drinks? (look for a published paper)

7. Is water a complement or a substitute for soda? Explain

8. In light of your answer to the previous question, should the cross-price elasticity be positive?

9. Do you favor a tax on sweetened drinks? Why or why not?

10. Do you favor a tax on added sugars, why or why not?

Answer 1

Question no 10 answer :-

First of all, we know the sugar tax, what happens and when and why it was brought.

The sugar tax is a levy put on drinks companies to crack down on high sugar levels in soft drinks.

Companies are now taxed according to the sugar content of their wares.

One is for drinks with a total sugar content of more than 5g per 100ml, while a second, higher levy is imposed on drinks with 8g per 100ml or more.

The sugar tax is designed to reduce the consumption of drinks with added sugar.

Other countries have introduced similar measures and have seen some success in reducing the drinking of fizzy drinks.

Mexico introduced a 10 per cent tax on sugary drinks in 2014 and saw a 12 per cent reduction over the first year.

Hungary brought in a tax on the drinks companies and saw a 40 per cent decrease in the amount of sugar in the products.

Brits have joined some of our European neighbours with the move with similar measures in place on drinks in France and Finland and the Norwegians chocolate tax.

But the tax has been met with furious resistance from some quarters with opponents saying it will hit the poor hardest and actually misses out some of the most sugary drinks.

Health campaigners have said the fizzy drinks tax should be extended to cover all chocolate, sweets and other confectionery containing the highest levels of sugar.

Chocolate and sweets are already included in Public Health England’s programme aiming for a 20 per cent reduction in sugar by 2020.

But Action on Sugar is urging a mandatory levy set at a minimum of 20 per cent on all confectionery products that contain high levels of sugar.

That includes all those those sold in coffee shops and restaurants.

The six-point manifesto is designed to help tackle the obesity and type 2 diabetes crisis, campaigners said.

In January 2019 tough new guidelines urged parents to stop children eating Frosties and Coco Pops for low-sugar alternatives such as Shredded Wheat.

To reduce over-consumption of sugars and halt
the epidemic of obesity and diabetes, countries need
comprehensive action plans that combine taxation,
restriction of marketing of sugary products
to children, and education..
Evidence shows that implementing taxes on sugary
drinks leads to reduced consumption of these products.
Several countries are well on their way to implementing
taxes on sugary drinks.

• Over-consumption of sugar is a major contributor
to obesity, diabetes and tooth decay.
• In the current food environment it is very easy
to consume too much sugar, especially from
sugary drinks.
• Sugary drinks are a major source of sugar in the
diet, and its consumption is increasing in most
countries, especially amongst children and
adolescents.
• On average, a single can of a sugary drink contains
around 40 grams of free sugars2
(equivalent to
around 10 teaspoons of table sugar).

WHO guidelines recommend that, to prevent
obesity and tooth decay, adults and children
reduce their consumption of free sugars to less
than 10% of their daily energy intake (equivalent
to around 12 teaspoons of table sugar for
adults). The guidelines suggest further reducing
intake of sugars to below 5% of daily energy
intake (around 6 teaspoons of table sugar for
adults) for additional health benefits(1).

Problem
• The worldwide prevalence of obesity has nearly tripled
since 1975 (2).
• An estimated 39% of adults were overweight in 2014,
and 13% were obese (3).
• Some 41 million children under the age of 5 were
overweight or obese in 2016 (4).
• The number of obese children and adolescents
rose from 11 million in 1975 to 124 million in 2016 –
a tenfold increase (2).
• The prevalence of overweight in pre-school aged
children is increasing fastest in low- and lower
middle-income countries.
• People who consume sugary drinks regularly – 1 to 2
cans a day or more – have a 26% greater risk of
developing type 2 diabetes than people who rarely
consume such drinks(5).
• The number of people with diabetes has risen from
108 million in 1980 to 422 million in 2014 (6).
• Apart from diabetes, obesity is a major risk factor
for heart diseases, cancers and other diseases.

Benefits
Taxes on sugary drinks help reduce consumption
and prevent obesity
• Taxation on sugary drinks is an effective intervention
to reduce sugar consumption (8).
• Evidence shows that a tax on sugary drinks that rises
prices by 20% can lead to a reduction in consumption
of around 20%, thus preventing obesity and diabetes(9).
Savings on healthcare
• Estimates suggest that, over 10 years, a tax on sugary
drinks of 1 cent per ounce in the United States of
America would result in more than US$ 17 billion
in healthcare cost savings(10).
Revenues raised from taxes can be used to
promote the health of the population
• This tax could generate approximately US$ 13 billion
in annual tax revenues in the United States of America
in 2016 (11).

• Based on 2014 data, a tax on sugary drinks of
1 yuan (US$ 0.16) per litre in China would generate
an estimated 73.6 billion yuan (US$ 11.8 billion)
in revenues(12).
• Revenue generated by these taxes could be spent
on efforts to improve health care systems, encourage
healthier diets, increase physical activity, or build
capacity for effective tax administration, further
increasing the value of this measure.
Low-income consumers and young people
get the greatest health benefits from taxes
• In Mexico, two years after the introduction of a tax on
sugary drinks, households with the fewest resources
reduced their purchases of sugary drinks by 11.7%,
compared to 7.6% for the general population (13).