There has been an unhealthy demand for processed fast food and efforts to change our diets are made more difficult by these foods often being more convenient, appealing, cheap and accessible than healthier alternatives.

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?

S + tax P2 Quantity Q2 Q. Consumers Loss in consumer surplus of A + B Consume I at P2 Producers loss in producer surplus of C + D Sell a smaller quantity at lower P3 Society Loss in allocatione efficiency DWL " Government revenue