ATMC BUS502 Principles of Economics for Accountants

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ATMC BUS502 Principles of Economics for Accountants
Assessment Task 2 – Responses to articles
Article 2: DUE via Safe Assign 6pm Saturday 12th May
Full Name:
Student number:
Tutor’s name:
Article Title:
“What is the Soda Tax and which cities have one”by Beverly Birdfrom The Balance from
25th November 2018. Available at:
https://www.thebalance.com/soda-tax-and-which-cities-have-one-4151209
Instructions:
Access the article at the URL given above and read it carefully. Answer the questions and
complete the diagrams in the spaces provided below. Use full sentences. If you use any
references, please list at least the URL of your source. Possible total for this assessment task is
15 marks.

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Question 1
According to the article, ‘the tax should reduce consumer demand for unhealthy food and
beverages’.Use the supply and demand diagram below to illustrate and explain how the
imposition of a tax affect consumers.
It is critical to note that the soda tax has been imposed on the sellers and thereby the cost
would increase for them. The increase cost would tend to impact the supply curve which
would shift upwards as has been illustrated in the graph attached. However, the
corresponding demand for the soda drinks would not alter and hence the demand curve
remains constant.
The shifting of the supply curve leads to a change in the equilibrium position for the soda
market whereby the prices tend to increase (From P* to P1) and the quantity consumed of
these products tends to decline (From Q* to Q1). This theoretically would enable lower
consumption of these drinks and hence lower the negative externality associated with
their consumption. From the consumer perspective, the imposition of tax would lead to
higher prices which would significant impact on the low income group.
.