According to the British Heart Foundation more than 10 per cent of six-year-olds in the United Kingdom are obese and a fifth of four-year-olds are overweight. To help reduce this problem Professor Malek, head of social sciences at the University of St Andrews, has suggested a 10 p tax on burgers that have more than a certain fat content. The aim is to reduce consumption of this type of food and encourage producers to use leaner meat.
A classic case of market failure leading to overconsumption and requiring government intervention. But is tax the best solution do you think?
http://www.telegraph.co.uk/health/1369524/Put-10p-tax-on-burgers-to-reduce-levels-of-obesity.html
This is an amazing blog. I know I am not a Pathways economist but as a parent of a Pathways economist, I am so impressed!!!
ReplyDeleteI would love to be a reader of this blog - if that is permitted.
I love the resources area and the mind maps
Thanks a lot for these kind words.
ReplyDeleteThis article is a typical example of a situation where there is a negative externality of consumption. The private producer does not take into account the negative externality of consumption, which in this case is the obesity it can lead to. A tax could possibly lead to the private producer's private cost moving closer to the actual cost, which includes both the private and social costs. However, there are other methods the government could use to tackle this situation, since nowadays, the fast food industry is becoming less elastic, meaning that while there is a small decrease in consumption, there will not be much impact, since the demand is inelastic. However, the government and other private consumptions could combat this problem by using negative advertising that highlights the possibility of obesity with regards to fast food products. This would hence lead to a greater impact on the private cost, and move it even closer to the actual social cost. At the same time, the government’s aim to make producers use leaner meat will mean that along with the fall in demand which shifts the private cost, the use of this meat will ensure that the social cost will drop, leading to the possibility of a market equilibrium growing stronger. However, too much taxing and negative advertising could be bad for the industry. This would cause underproduction, leading to excess demand, and the prices would be forced to go even higher, hence endangering the wishes of consumers and producers. In the long run, this could reduce the income of the producers and increase the demand of the consumers, leading to market failure again.
ReplyDeleteHence, to conclude, I would like to say that taxation is an effective way to handle the problem, but that too much of this could be bad for the market and could lead to another form of market failure.
Arjun A & Isra S
ReplyDeleteThis article written by Tara Womersley addresses an issue that is growing increasingly dangerous in today’s world, obesity. We already know that America has the largest amount of obese and unhealthy people and this article claims that Britain is not far from them.
This article is an example of a negative externality of consumption as the benefit of the society is less than that of the private consumers because the consumers are suffering from fatness while the producers are making profit.
To stop this market failure, a tax could be implemented on the burgers which would decrease the producer’s private benefit as the price of the burger would have increased, making people buy less of it, although the fast food industry is becoming more inelastic. “We need to make burgers more expensive so that people will choose alternatives and a tax that would place an emphasis on quality rather than quantity, with more control” as professor Malek rightly said.
Other methods that could be used by the government could be negative advertising showing the public the effect obsesity has on people and the health disadvantages. This would lead to an impact on the private cost and move is closer to the social cost. However, too much of this could be bad for the industry. It could lead to underproduction, excess demand, and prices would be forced to go even higher. Eventually this would lead to MARKET FAILURE. As for now taxation is the sufficient way to solve this problem, but one must be careful with this otherwise it could lead to market failure again.
The article focuses on a grave issue in today's environment, obesity. Britain is going through a dangerous issue which was and still is a major issue in some other countries.
ReplyDeleteThis article demonstrates a negative externality of consumption. The definition of a negative externalities of consumption is: when the consumption of a certain good or services harm/ affect third parties. In this case, the consumption of the burger is one of the many causes of obesity. The benefit to the society is less than the benefit to the producers, who are gaining profit due to the high consumption of these goods.
The MSB of consumption will be less than the MPB of consumption. This leads to the burger being over-consumed relative to the social optimum. Without government intervention the burger will be under-priced and the negative externalities will not be taken into account.
In order to fix this particular problem, a tax could be put on the burger in order to increase the price of them which will in turn decrease the consumption of the burgers. But other than this method, the governement could advertise the harm caused by eating to many burgers. This would lead to the private cost shifting to the social cost. If this is done in excess it could lead to problems such as excess demand, and inflation. Taxation and advertising are both good ways of solving this problem but they should be looked at with care.
This article is about the issue, that is obesity, which is increasing in today's world. Professor Malek, head of social sciences at the University of St Andrews, has suggested a 10% tax on burgers that have more than a certain fat content. essentially, this goal is to reduce consumption of this type of food.
ReplyDeleteThis article shows the negative externality of consumption.
Government can reduce the usage of these food items by imposing tax, so that there could be fall in demand. Government can also advertise the bad effects of burgers and there should be a notice on the product about the harm that it could provide just like any tobacco or alcoholic product.
But, imposing more tax could lower the demand, which could affect the industries which are producing these products. As result, they could go in loss.
Government should balance the supply of these kind of products.
Obesity is becoming a very big issue in today’s world. This is mainly because people nowadays have a more sedentary lifestyle and are overindulging in unhealthy, fatty foods. According to the above article, a solution to this problem would be to put a tax on burgers with a high fat content in order to discourage people from buying them.
ReplyDeleteMarket Failure occurs when the social cost is unequal to the social benefit. In this case, there is a negative externality of consumption, meaning that the social cost is greater than the private cost. The solution, according to the article is to put a tax. The tax will increase private cost, thus equating it to the social cost. The increase in private cost will reduce demand for burgers as they will now be more expensive to buy.
While taxation is one solution, I feel that it may not be the best solution, as burgers have a relatively inelastic demand. It takes a small portion of peoples disposable incomes, and a small change in price will not make too much of a difference. Moreover, since the original issue was overconsumption, I doubt that a slightly more expensive meal will deter somebody so addicted to eating junk. Negative advertising and spreading awareness would probably be more effective in this case, so that people can make more informed decisions about their diet.
The article talks about today's society, which is obesity and that is increasing at a higher rate. The consumption of the burger is one of the many causes of obesity. The benefit to the society is less than the benefit to the producers, who are gaining profit due to the high consumption of these goods. This leads to the over consumption of burgers per day.If this is done in excess it could lead to problems such as excess demand. Taxation and advertising are both good ways of solving these because people reads the news article and then they will try to understand the problem. But too much of taxation and advertisement can lead to another market. failure
ReplyDeleteThis article is related to one of the most important issues of our society i.e. Obesity. Here we can see a negative externality of consumption which occurs due to over consumption of burgers in children. A negative externality of consumption occurs when the consumption of a good, product or service harms or affects third parties. In this case, consumption of burger is one of the main reasons for obesity. Here the MPB is greater than the MSB and so the market is not at its optimum level and so the producers are gaining at the cost of the society’s benefit. If the situation is not controlled, this can lead to burgers being over consumed and the negative externality will not be taken into consideration. To control the situation, the government is trying to intervene by imposing tax on the burgers. By doing so, the price of the burgers will increase which in turn will decrease the demand for them. Another method is by advertising. The government can advertise the harmful effects of over consumption of burger. This can shift the private cost to the social cost. But too much of advertising and taxation can lead to excess of demand. So the government should keep an eye on over taxation and advertisement.
ReplyDeleteThe article gives an overview of one of the most general humane issues experienced on a global scale. Obesity. Agreed if the world did not move onto burgers or pizzas, how would anyone ever have said bon apetite' ?! But then, look at what's happening? Eat to live, not live to eat, wasn't it? The tax enforcement of 10 p tax on burgers that have more than a certain fat content could be effective. That way, companies would prefer purchase of low fat edible ingredients at cheaper rates rather than high fat content ingredients at larger prices. Firms' demand for higher fat content ingredients in the market would fall. Market to avoid suffering losses would shift their production towards profit sources. Only low fat content burgers would be supplied and the obesity levels at which the nations' young minds suffer would lower down.
ReplyDelete