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BUS702- Economics for Managers

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University of Southern California

   

BUS702 Economics for Managers (BUS702)

   

Added on  2020-05-04

BUS702- Economics for Managers

   

University of Southern California

   

BUS702 Economics for Managers (BUS702)

   Added on 2020-05-04

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Running Head: Government Policy ToolsThe use of Government Policy Tools to Influence Economic BehaviorStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
BUS702- Economics for Managers_1
Government Policy Tools2The use of Government Policy Tools to Influence Economic BehaviorQuestion 1When making any pricing decision, it is crucial for the decision maker to determine the price elasticity of demand for the product at consideration. This is because it determines the levelof change in demand that may result from that price change. The major idea of imposing a tax onsugar is to make the products expensive so as to discourage consumption. I would support the taximposition on the basis that it will most likely discourage the consumption of the product especially to the low and middle income group who rely mostly on the government health care. For the rich group, consumption may not change but this will not impose huge costs on the government as most of them have some private doctors. For the high calorie sweets and sugary snacks, PED is -0.270 whereas for low calories its -0.295. This inelastic demand represents a small decrease in demand.Graph: Changes in Demand for Sweets and Sugary Snacks after a tax imposition A shift to healthy eatingA shift to unhealthy eatingP1TaxP0DemandQ1Q0QuantityThe inelastic demand is the reason for the small demand decrease after the high price is charged; the shift to healthy eating is lower. However, the government’s revenue will rise enabling subsidization of fruits and vegetables whose demand is depressed by high prices. The cost on health services will somehow be lower; but the tax imposed has to be high to effect some significant change.
BUS702- Economics for Managers_2

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