Reference no: EM131662
Analysis of a Proposed Soda Tax
Article from the Wall Street Journal, entitled "Soda Tax Weighed to Pay for Health Care."
Questions
1. The likely impact of a soda tax on the consumption of sugary sodas
What is the supply curve likely to look like (upward or downward sloping, steeply sloped or shallow)? Explain.
On the demand side, what determines the demand for sugary sodas? What are its major substitutes? What do you expect the demand curve to look like (upward or downward sloping? steeply sloped or shallow?) Explain.
What does the market for sugary sodas look like? Provide a supply-demand graph with realistic prices.
Graphically show the impact of the tax on price and consumption. Do you expect to be the impacts of a soda tax on prices and consumption to be large or small? Explain.
2. The policy context
Is there an externality involved in consuming sugary sodas? Is there an economic argument for taxing the consumption of sugary sodas? Is there an economic argument for government regulation?
3. The burden on customers and producers, and the effect on tax revenues:
What do you think is the likely impact on low income consumers? On company profits? Are these a problem?
What do you think is the likely impact on the amount of tax revenue the government will raiseto pay for health care?On the health of consumers? Explain.