Business Economics Module: Obesity Crisis and Market Failure

This essay examines the obesity crisis through the lens of market failure, analyzing how imperfections in the food market and government policies influence business decisions and consumer behavior. It explores how the free market entry of companies selling unhealthy food, coupled with economic tr...Read More

The obesity crisis as
market failure an
analysis of systematic
causes and corrective
mechanisms

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Market imperfections and market failure can affect entrepreneurship activity...........................1
Market imperfections and market failure affect labour and financial products using relevant
examples......................................................................................................................................2
Government’s economic policies can shape business strategy....................................................3
Government’s economic policies can shape business decisions.................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Obesity is a medical condition in which excess body fat has accumulated to the extent that it
may have an adverse effect on health. It is defined by body mass index (BMI) and further
evaluated in terms of fat distribution via the waist–hip ratio and total cardiovascular risk factors.
It affects the health of an individual negatively and also reduces their quality of life. Present
report will lay emphasis explain how market imperfections and market failure can affect
entrepreneurship activity. It will also focus on how market imperfections and market failure
affect labor and financial products. Assignment will also discuss a logical interpretation of how
the government’s economic policies can shape business strategy. It will also interpret how
government’s economic policies can shape business decisions.
MAIN BODY
Market imperfections and market failure can affect entrepreneurship activity
In order to achieve success entrepreneurs needs to bring creative and innovative ideas
according to the needs and demands of consumers. It has been analysed that that imperfections in
market can create opportunities for entrepreneur as well as it can also affect the entrepreneurship
activity (Lusk, 2017). The case study has provided with the details that imperfections in the
market for food have contributed to obesity. The market failure has given rise to more and more
population becoming overweight. It has been analyzed that obesity is been increasing because of
the free market entry of new start up company’s who is been involved in selling junk food in
order to only provide delicious food to consumer without taking care of the health outcome of
consumers. It has also been analyzed that obesity is also been caused because of the economic
trends. The restaurants and hotels are charging high price for the nutritious food and also less
price for the junk food.
It has also been analyzed that consumer is only involved in buying that food which contains
high calories and cholesterol level as it tastes better than the healthy food. This has hugely
affected the health outcome of consumers as this type of food is selling at low price. It has been
analyzed that nutrition and health are considered as less important than the taste and price of
food. These imperfections in market have highly affected the entrepreneurial activities. This
inexpensive food has contributed to the weight gain. According to the research it has been
analyzed that market is functioning effectively and not well, the consumer is been involved in
utilizing their individual capabilities. In the market failure there is need for the corrective
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measures by the government. These imperfections in market have highly affected the
entrepreneurial activities. There are various causes of market failure which has been defined in
the case study like one of the major factors is monopoly being in power which is applicable in
the context of food industry. This is highly fragmented and competitive. The market for food
suffers because of the imperfection information which makes consumers highly vulnerable.
Entrepreneurs need to be engaged in thinking about all of the possibilities in order to grow.
Market imperfections and market failure affect labour and financial products using relevant
examples
The case study has provided the details that the imperfections in market and failure of the
same have highly affected the labour and financial products. It has been analysed that from the
past fw years the cost of producing the food products has been reduced because of the increase in
technology and forced labour participation (Campbell and et.al., 2018). This has caused the
decline in prices of the real food and in this the most declines in prices have been seen by the
unhealthiest food. Author has provided with the suggestion that in order to lower down the
consumption of unhealthy food, there prices can be increased. On the other hand the nutritious
food prices can be decreased. This will assist in reducing the rate of obesity in United States. It
will also assist in enhancing the health outcome of the majority of population living over there.
The argument is been done on this in order to make prices fall into line and also it is more
beneficial for the society. The consumer demand curve will shift according to this. In order to
make consumer eat and buy health products, the jurisdiction can charge taxes on the high
calories products.
Like for example California has become the first city in United States to impose tax on high
calorie sugar. This can reduce the consumption of high calorie products and also can reduce the
prevalence rate of obesity. It has also been analysed that individual suffering from the obesity in
developed countries are higher, they are higher among people of lower socio economic status. It
has also been analysed that these taxes can affect the life of poor as they will not be able to but
food for the less price (Sassi, Devaux and Cecchini, 2016). This can negatively affect their
quality of life. Recent socioeconomic and demographic trends paint a mixed picture of
consumers ‘price sensitivity and likely response to financial incentives. It has also been analyzed
and evaluated from the research that so many consumers are willing to pay for high quality
nutritious food in order to enhance their health outcome. Several regulations can be implemented
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in order to overcome from the market failure related to obesity. It has also been analyses that
some consumers might not like to pay the taxes, they can feel like avoiding tax. There are might
be chances that implementing tax on food product can become highly unpopular among
consumers so government needs to think about the other intervention so that market failure
related to obesity can be overcome. More corrective mechanism must be launched so that
consumers are been involved in consuming more organic food rather than unhealthy one.
Implementation of agricultural subsidy policy can also be used as the substitute for promoting
the use of organic food. This will reduce down the obesity level.
Government’s economic policies can shape business strategy
In order to overcome the market imperfections and market failure, government economic
policy can shape the business strategy and can also help the entrepreneurs in shaping their
business ideas and gain success (Hemphill, 2018). It will also reduce down the prevalence rate of
obesity. Agricultural policies and subsidies can upstream the industry receives. It has also been
analysed that there has been quiet a discussion which includes that these policies subsidies only
that food which is high in calorie such as high fructose corn syrup, meat.
Government also needs to be engaged in lowering down the price of these foods to their
healthiest alternative. These government policies will assist in reducing down the problem of
obesity and also more focus will be given on the high organic products. It has also been analyzed
that many marketing intervention can help government in tilting the demand curve. The
consumer will be highly involved in buying the healthy products if its prices are been lowered
down (Cawley, 2016). They tend to buy unhealthier product as it is inexpensive and also cheap
and also the taste is better than the nutritious food. There are various types of regulations which
can be given on market failure related to obesity. It can include that government can put ban on
advertising of unhealthy food and services. They can also be involved in putting possible
restriction on the distribution. This will affect the consumption of the food which is unhealthy
and is possibly giving rise to the obesity.
These interventions will also help government in improvising the quality of life and health
outcome of the individual who has been suffering the problem of being overweight. Government
will also be involved in motivating consumers for the healthy eating habits so that the prevalence
rate of obesity. It has also been analyzed that government can also adopt the policy to put
restriction on the distribution of the unhealthy food products. They can also impose taxes on the
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distribution of high calorie food. This will make government shift the demand curve. It will also
assist them in solving the problem of market failure related to obesity. It has also been analyzed
that it is really necessary for government to adopt all these interventions so that they can reduce
the prevalence rate of obesity. This will assist them in enhancing quality of life of the people
suffering from the obesity problem.
Government’s economic policies can shape business decisions
It has been analysed that government economic policies can change the decision which has
been made by the entrepreneurs in order to enter the food market. These policies can force the
sellers to sell those products which are of high quality and also organic full of nutrients. This will
assist them in reducing the sale of unhealthy food products which contain high calorie in it. It has
also been analysed that if the government impose restriction on distribution of unhealthy food
product than the business will take the decision to stop distributing products consisting of high
calorie. This will help them in overcoming the problem of obesity which is currently been faced
by them.
Various type of coping mechanism is also been used by government, they have been
involved in motivating consumers to buy healthy products so that their health outcome can be
improved (Karnani, McFerran and Mukhopadhyay, 2016). If government charges tax on high
calorie products than less amount of business will be involved in selling these products. It has
also been analysed from the research that many consumers are willing to pay for the high quality
organic product. The taxes can also be implemented on the high calorie products. This will assist
consumers in not giving extra cost to these unhealthy products. It will help them in changing
their business decisions and also they will be involved in selling out more organic products. It
has also been analysed that government is been thinking of lowering down the prices of nutrient
products so that more consumer will buy it. It has also been analysed that they are also been
involved in enhancing the prices of unhealthy food products so that market imperfections and
failure related to obesity can be solved. They will manage to lower down the problems related to
obesity.
CONCLUSION
From the above study it has been summarised that the imperfections in market as highly
affected the entrepreneurial activity. It has also been analysed that many of the entrepreneurs
have been involved in providing unhealthy food at lower price and also according to the taste and
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preference of consumers. It has also been analysed that individual suffering from the obesity in
developed countries are higher, they are higher among people of lower socio economic status. It
has also been analysed that these taxes can affect the life of poor as they will not be able to buy
food for the less price. There have been various interventions which have been adopted by the
government in order to overcome the problem of market failure related to obesity. The
government has been trying to implement various type of coping mechanism so that problem of
obesity can be reduced. They have also been involved in distributing product which contains
high amount of calories. This has assisted in improvising the health outcome of people who have
been suffering from the problem of overweight. This has also assisted them in improvising the
quality of life of the people suffering from problem of obesity. It has also been analysed from the
report that government policies has also changed the business decision making. Government has
been involved imposing taxes on high calorie products in order to reduce down the problem of
obesity. This has assisted them in improvising the health outcome of individual.
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REFERENCES
Books and Journals
Karnani, A., McFerran, B. and Mukhopadhyay, A., 2016. The obesity crisis as market failure:
An analysis of systemic causes and corrective mechanisms. Journal of the Association for
Consumer Research, 1(3), pp.445-470.
Hemphill, T.A., 2018. Obesity in America: A Market Failure?. Business and Society
Review, 123(4), pp.619-630.
Campbell, J.A. and et.al., 2018. A Qualitative Investigation of Information Asymmetry for
Obesity Surgery: Diversity of Patient Experiences in the Information Age and Demand-
Induced Supply. Value in Health, 21, pp.S23-S24.
Lusk, J.L., 2017. Economics and obesity policy. International Journal of Obesity, 41(6), pp.831-
834.
Cawley, J., 2016. Does anything work to reduce obesity?(Yes, modestly). Journal of health
politics, policy and law, 41(3), pp.463-472.
Sassi, F., Devaux, M. and Cecchini, M., 2016. The health impacts of obesity. In World Scientific
Handbook of Global Health Economics and Public Policy: Volume 2: Health Determinants
and Outcomes (pp. 355-396).
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