MPE781 Economics Assignment: Necessity, Luxury, and Taxation

This economics assignment, prepared by a student, delves into the core concepts of economics, focusing on the distinctions between luxury and necessity goods. It examines the factors influencing tax revenue, particularly concerning the imposition of taxes on these different types of goods, and analyzes Adam Smith's rationale for taxing luxury items and goods of universal consumption. The assignment further investigates the potential consequences of sugar taxes, including their impact on consumer behavior, such as the shift towards consuming fewer fruits and vegetables and more salt. It also explores the costs associated with sugar tax implementation, specifically addressing the concept of deadweight loss and its implications for market efficiency and consumer welfare. The analysis considers how the elasticity of demand and supply influences the magnitude of deadweight loss. This assignment provides a comprehensive overview of these economic principles, supported by relevant figures and references, offering valuable insights into the complexities of taxation and market dynamics.