Fiscal Policies Assignment

Added on - 29 Apr 2020

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Running Head: Fiscal PoliciesThe Implementation of Fiscal Policies by the Australian GovernmentBy (Name)(Tutor)(University)(Date)
Fiscal Policies2The Implementation of Fiscal Policies by the Australian GovernmentQuestion 1Tax on sugary foods may sound as a better idea to stimulate people to turn to healthyeating. I would argue for tax/subsidy imposition on sugary foods as there is a possibility ofpromoting some healthy eating behavior. Various source has given the price elasticity for sugaryfoods to be less than one (absolutely). This means that sugary foods demand is relativelyinelastic to prices changes. Approximately, the PED for sugary foods is about -0.3; this againmeans that the change in demand after a price increase which will result from the imposition ofthe tax will be too small. Consumers will continue consuming nearly the same level of foodstuffs as before the imposition; this will raise greater tax revenue. If this revenue is used tosubsidize the consumption of healthy foods, the price for heathy foods will fall and will beaffordable to many. Sweets and sugary snack are things consumers can do without since they arenot a necessity. Thus, their consumption will be helping many people to afford other healthyfoods after tax imposition. Consumers’ welfare will be raised from purchasing healthy foods at alower price.Fig: Inelastic DemandPriceP1P0DQ1 Q0 Quantity of Sugary foodsThe big rise in price causes only a small fall in demand because of the inelastic nature ofdemand.
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