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? c. Some argue that a better approach is to improve public awareness of the importance of a healthy diet. How would a successful such campaign affect efficiency? How does it compare to a tax? Refer to your diagram to show how this would work. d. The recent development of a new type of drugs has been described as potentially providing an effective solution to problems with obesity ("A new class of drugs for weight-loss could end obesity", 2023). If such drugs became widely available to the public (at a low cost), would this affect the case for implementing a tax on unhealthy food in Australia? e. Use an individual firm diagram to illustrate how Novo Nordisk, who hold a patent for this type of drug, makes decisions on pricing and output, and how this affects their profits (assume increasing marginal costs here). f. What are the welfare implications of allowing Novo Nordisk to hold the patent for this drug? If this drug has the potential to be a game-changer in the fight against obesity, are there concerns in terms of affordability and access? How should governments approach this dilemma? What would happen if Novo Nordisk could not patent their drug, and anyone could produce it? g. Having considered the problems of unhealthy diet in our society, and some possible solutions (i.e. tax, public awareness campaign, pharmaceuticals), conclude your assignment with a short reflection on how you think the government should resolve this problem