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Economics for Managers BUS702

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University of Southern California

   

BUS702 Economics for Managers (BUS702)

   

Added on  2020-05-03

Economics for Managers BUS702

   

University of Southern California

   

BUS702 Economics for Managers (BUS702)

   Added on 2020-05-03

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Part I: Sugar Tax Arguing For:The government should implement the tax on sugar intended to shift the consumptionof a healthier diet. People become obese and hence impose costs on health service and hencethe government should be more proactive than reactive and hence must play a key role to taxsugar. Sugar is among the unhealthy foods and subsidise nutritious including the ones shownin the table below (see appendix): Implementing the taxes/subsidies designed to encouragehealthy eating and/or discourage unhealthy eating is thus inevitable. The idea of sugar tax isexcellent because it will raise revenue and simultaneously make consumers to think twicebefore eating or drinking unhealthy sugary foods thus minimizing obesity. Arguing Against:Demand is inelastic as seen by the above elasticities and hence sugar tax will beineffective and will never solve the problem of obesity. Thus, taxation will only take muchmoney from people in terms of tax revenue will never solve the primary intended purpose.Page 1 of 5
Economics for Managers BUS702_1
The figure above indicates 3 potential means through which sugar tax shall impact themarket for soft drink. Both supply and demand curves shall shift to leftwards; the equilibriumquantity will decrease whereas the equilibrium price might surge; decline or remainunaffected demonstrated above by first, second and third diagrams from LHS. Part II: Question (a)Keynes recognized the lack of effective demand and suggested governmentintervention by postulating the simple idea. He held that if individual fail to spendadequately, no one will spend (during Great Depression) but the government who shouldspend because economy cannot automatically adjust. The simple idea is for the governmentto spend where private sector will not as a fill-in stopgap. Page 2 of 5
Economics for Managers BUS702_2

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