Deadweight loss: The economics of unhealthy food

Malnutrition has historically been understood as a food deficit problem plaguing mostly poor and underdeveloped countries. However, a different form of this problem is now spreading across all parts of the world, as our diets are increasingly dominated by highly processed food which is energy-dense but low in the types of nutrients we need to stay healthy ("Obese children will outnumber the underweight for the first time", 2021). This trend has been linked to a range of poor health outcomes - most obviously those directly associated with overweight and obesity, including diabetes and cardiovascular disease; but also various cancers, and even reduced cognitive ability and mental well-being ("How food affects the mind as well as the body", 2022). Efforts to change our diets are made more difficult by these foods often being more convenient, appealing, cheap and accessible than healthier alternatives. This assignment will consider this problem, and some possible solutions, from economic perspective.

[Construct the rest of your assignment by addressing each of the questions below, in turn.]

a. Construct a simple general model of demand and supply of unhealthy ultra-processed fast-food, assuming this market is unregulated. Is this market efficient?

b. Many countries have considered, and some have implemented, taxes on unhealthy foods in a bid to address public health problems associated with excessive consumption of these foods. With reference to the model constructed for (a), evaluate the economic rationale behind such taxes. What are the implications of such a tax for efficiency?