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BUS702: Economics for Managers Assignment

   

Added on  2020-05-03

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Economic For Manager 1ECONOMIC FOR MANAGERBy (Student’s Name)Professor’s NameCollegeCourseDatePage 1 of 6
BUS702: Economics for Managers Assignment_1

Economic For Manager 2Part 1:Argument For: If the government of Australia combines taxes with subsidies on various beveragesand foods, it can significantly enhance citizens’ health while potentially saving billions inhealth-care expenditure due to reduced consumption which in turns decreases obesity. Thetaxes of sugary drinks/unhealthy foods will help address massive and increasing obesityburden (A$4 billion yearly) and its related chronic illness. Sugar tax will tweak drinks andfood prices hence making healthy alternatives increasingly affordable compared to unhealthycommodities. This will influence what people buy. This can work in the same manner ascigarettes and alcoholic drinks’ taxes that reduce smoking and drinking respectively. A sugar tax leads to extrenal cost as suagr drinks impose higher external costs on the society .The overcosnmption of sugar remains a major trigger of health problems like obesity and itsrelated ailments like back pan and heart diseas. These extrenal cost are manifested in higherPage 2 of 6
BUS702: Economics for Managers Assignment_2

Economic For Manager 3cost imposed on natioal health service. The poor health negatively imapcts work henceproductvuty. Thus sugar consumption’s social cost is higher than sugar private-cost. Thediagram illustrates the effct of sugar with external-costs. Free-market prcie is Q1 whereas isPrice P1. Yet socially effcient poin is at Q2 whereby social-marginal benefit (SMB)=Social-marginal cost (SMC). The panecea is to impoase a sugar tax that increase price therebyreducing quantity to Q2. Argument Against: These products have inelastic demand and hence sugar tax will not bar theirconsumption. The effect will be that the government will be hurting its own people due toincreased prices but will never meet the intended purpose of limiting consumption and areduction on incidence of obesity and hence reduced costs of obesity. The government shouldthus use other non-tax strategies like creating awareness on health risk associated withobesity without necessarily increasing prices. Part II:Q (a)J.M. Keynes’ “simple idea” is called the demand side policy. Keynes held that thegovernment should step in and assist individuals who do not have the work. Keynes held thatwhere people are working, the economy will be good but economy will be bad when peopledo not work. Keynes held that where the economy is bad (recession), the people wish to savetheir money. That is, people do not spend their money on, or even invest in, items their need.Consequently, there will be less economic activities. Thus the government must spend extramoney where people do not have work. The administration will then borrow money andgiven the citizens jobs or work. The working individual will thus spend money again andpurchase items. This will help other individuals to get job. Page 3 of 6
BUS702: Economics for Managers Assignment_3

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