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The Economics of a Sugar Tax with Reference to Evidence from Mexico

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Added on  2023-01-11

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This article discusses the economics of a sugar tax with reference to evidence from Mexico, including price elasticity of demand and unintended consequences. It also explores the potential implementation of a sugar tax in Australia.

The Economics of a Sugar Tax with Reference to Evidence from Mexico

Submit a PDF document with digitally generated content, addressing key microeconomic concepts, economic tools in a digital format, and real-world issues. Word limit: 2000 words.

   Added on 2023-01-11

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MAE101 - Economic Principles - T1
2020
The Economics of a Sugar Tax with Reference to Evidence from Mexico_1
TABLE OF CONTENTS
MAIN BODY...................................................................................................................................1
Question 1: The economics of a sugar tax with reference to evidence from Mexico.................1
Question 2: A sugar tax for Australia.........................................................................................5
Question 3: Unintended consequences........................................................................................5
REFERENCES................................................................................................................................7
The Economics of a Sugar Tax with Reference to Evidence from Mexico_2
MAIN BODY
Question 1: The economics of a sugar tax with reference to evidence from Mexico.
a
The formula for price elasticity of demand is percentage change in the quantity demanded upon
percentage change in price.
i) For the economy on average
Price elasticity of demand = Percentage change in the quantity demanded/ Percentage change in
price.
Price elasticity of demand = 7.6%/ 10%
Price elasticity of demand = 0.76
ii) For low income households
Price elasticity of demand = Percentage change in the quantity demanded/ Percentage change in
price.
Price elasticity of demand = 11.7%/ 10%
Price elasticity of demand = 1.17
b
If the price elasticity of demand is more than 1 then it is considered to be elastic which means
that the product is highly sensitive to the increase in price and vice versa. The economy on
average group is considered to be more responsive to the tax on Sugar Sweetened Beverage.
c
Non availability of the substitute goods will eventually result in increase in price of the
goods which has been available in the market.
The increase in the demand of the product also eventually leads to increase in the price of
the product.
Low degree of competition in the market is also referred to as one of the most significant
factor which results increase in the price of the product (Olmstead and et.al., 2015).
Monopoly of the product within the market is also one of the most relevant factor which
results in the increase in the price of the SSB product.
1
The Economics of a Sugar Tax with Reference to Evidence from Mexico_3

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