MICROECONOMICS Microeconomics Trimester Individual Assignment

Running head: MICROECONOMICS
Microeconomics Trimester
Individual Assignment
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Table of Contents
Introduction......................................................................................................................................3
Economic Concepts.........................................................................................................................3
Discussion and Application of Economic Concepts........................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9
Appendix........................................................................................................................................10

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Economic concepts linked with the learning objectives
The economic concepts used in the article are:
 Negative externality and Pigouvian Tax
 Tax effect on Demand and Supply
These concepts linked to various learning objectives including
1. consider how a tax on a good affects the price of the good and the quantity sold
2. learn the meaning and causes of the deadweight loss of a tax
3. see that the equilibrium of supply and demand maximizes total surplus in a market
4. examine the various government policies aimed at solving the problem of externalities
5. see why externalities can make market outcomes inefficient
Introduction
The sugar tax debate had been a common phenomenon to curb the usage of sugary drinks and it
has been considered good amongst the households but it has it cons to it. Consumption of sugary
drinks not only imposes costs that can be detrimental to an individual but also to the society
(Gertkin & Rifkin, 2018). In a scenario, like this a good tax by government can prove to be
helpful in terms of health care, but in the same an increase the inequality gap between the rich
and poor. The economic that can underlay the path of discussion is negative externalities leading
to market inefficiencies and the subsequent effects of the tax on sugary drinks leading to changes
in the demand and supply conditions in the economy as well (Heise, et al., 2016). Moreover,
with the help of government intervention, the means in which it solved using tax. Furthermore,

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the concepts lead to understand that sugar is a public health problem that requires legislative
control to act on market failures.
Economic Concepts
Negative externalities are the concept that arises when the cost to society because of the good in
demand is higher than the amount of price the consumer is shelling out for it. Although, the
consumer decides based on its marginal benefit and marginal cost (MB = MC). However, if
proper actions are not taken then it results in market inefficiencies. The negative externality
results in unregulated market that does not take the responsibility for the cost and is transferred
down to the society (Mankiw, 2015). The lower marginal costs shifts the supply curve
downwards based on the supply curve faced by the society. The product is hoarded and sold
leading to dead weight loss in the society. However, the same can be illustrated diagrammatically
as given below and where P* is the socially efficient price and Q* is the socially efficient
quantity.