Suppose you are a dietician concerned with obesity and heart disease. You want policy makers to better
Question:
Suppose you are a dietician concerned with obesity and heart disease. You want policy makers to better jobs at fighting unhealthy consumption behavior in the US. You just finished an economics course and learned about how taxes influence markets. You think it might be a good policy idea to use taxes to reduce the consumption of sugary drinks (like soda) as a way to discourage bad dietary choices amongst consumers. Not surprisingly, after a little research, you would find that Denmark, Finland, France, Hungary, Mexico, the Navajo Nation, and the city of Berkeley, California have all used a tax on unhealthy foods. Suppose you decide to lobby a tax on soda ("pop") containing high fructose corn syrup in the US. Let us examine this policy proposal:
- Show the analysis of a tax on the soda market where sellers will be legally responsible for paying the tax. What would be a hypothetical market diagram for the market for soft drinks (soda - a typically highly sweetened drink). DRAW the CONSUMER DEMAND CURVE SO THAT IT IS MORE ELASTIC THAN SUPPLY. Show an initial equilibrium. Shift the appropriate curve (the amount can be arbitrary and call it "t") and show the new equilibrium price and quantity. Be sure to show the new market price and the price that sellers effectively receive after the tax. Also, shade in the area of the graph that represents tax revenue.