Business Economics Assignment 2: The Impact of Sugar Tax in the UK

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Business Economics
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Contents
Assignment 2...................................................................................................................................2
1....................................................................................................................................................2
2....................................................................................................................................................5
Conclusion:......................................................................................................................................7
References:......................................................................................................................................8
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Assignment 2
1.
Market failure is said to exist when the market is incapable or fails to implement all the efforts or
gains that can be attained through selling and buying. Excess of pollution also becomes the
reason for the market failure when the overall cost of the reduced discharge to the industry is
lower than the advantages to the population at large. All these failures of the market can be
considered as negative externalities. In other words, it can be said that, in cases, markets are
unable to organize allocation or apportionment of products and services in an effective and
efficient manner then such a situation can be described as market failure. The term market failure
does not imply that it is not working at all, but it means that the market is not producing goods
and services in accordance with the demand and needs of society. Hence market failure is the
situation of the insufficient distribution of the products and services to the consumer within the
society (Cotton, 2018). Market failure happens when the price technique breaks down in regard
to all the cost and profit required for presenting and consuming commodities and services.
Therefore market failure occurs due to the improper supply as per social norms, in the present
regime, of globalization and industrialization there are modest opportunities or possibilities of a
perfect market, and reasons for this are negativity, externality, insufficient procedures, be
deficient in public goods, and environmental problems. Negativities and externalities exist when
there is a high transaction cost of resolving market failure. Externalities affect the third party too.
Therefore the market should be addressed in such a way so it can work efficiently and optimally.
Whereas the imperfect markets are the market in which prices and rates of commodities and
provision of services are prejudiced by the individual seller and purchaser. The imperfect market
always works contrary to the perfect market; there are mainly four kinds of the imperfect market
like flawed, information asymmetries, unproductive firms, or industry, and last but not the least
negative externalities. Thus Market failure and imperfect market both in the labor and financial
product can adversely affect the entrepreneurial activities. That means, market failure results due
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to the lack of labor and financial product that further puts adverse effect over the entrepreneurial
activities.
In the context of the UK case study of the sugar tax, entrepreneurial activities adversely affected
by the reason of market failure and market imperfections. As it is mentioned in the case study
that soft drinks contained a high amount of sugar and it's over consumption from the view of
society may cause market failure. Imperfect market unfavorably affects the entrepreneurial
activities in the UK because the sugar drinks like coca-cola contains a large quantity of the sugar
content that further leads to fatness among the community and the society, thus corpulence
affects the labor which can be followed by the bad effect over the production capacity of the
industry that at last concluded with the short and minimum manufacturing or production
efficiency. According to the study or mentioned in the UK sugar case study over-consumption of
the sugar contains in the soft drink can cause a loss of £ 1.3 trillion and £47 billion in the U.K
each year (Buckton, 2018). And this can be said as the massive failure of the entrepreneurs and
their actions in the society and the country. According to the case study and survey
overconsumption of the high sugar contained drink can also contribute to negatively affecting the
health-related issue among the society and children that may also cause to economic effect in the
country. Consumption excess of the soft drinks that contain the high sugar content can influence
the life expectancy of the consumer or the community and also causes the heart-related problem
between the community and the society. Negative externalities produce a negative effect on
entrepreneurial activities and also turn down the economic conditions of the nation. According to
the lessons from the UK sugar base case study utilization of the sugar contained drinks can cause
the disease condition between the people because it includes a large quantity of sugar. Slighter
manufacture or delayed production contributes to slower development of the industry. Because
of that reason, entrepreneurs can’t survive efficiently as this problem leads to bad effects over the
activities of the entrepreneurs, which obstruct the production process in various firms (Cotton,
2018).
Similarly imperfect market condition also badly affects the health and life expectancy of the
people and consumers at large scale. Lack of information among the society related to the
overconsumption of sugary drinks results in imperfect market conditions. Hence if the society
and labor continuously involve in consuming the sugar contained soft drinks this can leads to a
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reduction in the working capacity of the labor within the environment. High consumption of the
drinks among the children become the reason of the fatness and the obesity that further affects
the earning capacity of the labor along with the production efficiency and financial products
within the society and environment. This also results in the low revenue generation within the
country and become less earning sources for labor. Therefore, it is clear that the large force of
excess intake of the sugar is associated with the manufacturing of the firm. That's why the
government increases the tax on the utilization of the soft drinks because the making of the tax
can be utilizing for the sport-related activities between the children and youth. If there will be no
production, there would be nil sales or lesser sales, which further leads to the low generation of
the revenue for the state or central government in the nation. This can cause threats among the
labor classes and thus declines the entrepreneur’s revenue (Cotton, 2018). So by the above
analysis, it can be said that excess intake or over-consumption of sugar contained soft drink can
produce or likely to produces negative impact over the entrepreneur as well to the labor along
with the financial products. It also happens that intake of the sugar drinks turn into the cause of
the market failure because the community and the society are not aware regarding the pessimistic
force of these sugary contained drinks over their health, therefore they stop consuming these
drinks but opposing to these many of people in the society aware from the bad effects even they
consume such sugary soft drinks because they prefer short term advantages as an alternative of
preferring the long term harmful impact of such drinks. The health care department or sector also
focuses over the negative impact of such drinks that cause obesity and diabetes-related problem
among the youth and children and such bad effects are dealt by the health care sector and
hospital of UK. Hence increasing obesity also adversely impacts the production capacity and
also reduces overall earnings of the labor.
So from the above discussion it is concluded that over-consumption can badly affect the overall
production capacity of the society and which further provides a negative impact over the
entrepreneurial activities, therefore overconsumption should minimize in the best possible
manner, and government also make some provisions and helpful measures in order to reduce
such kind of issues and problem within the society (Pell, et. al., 2019).
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2.
Tax is a very relevant element within and critical factor for the economy of the country and this
also affects the business policy and decision making policy within the organization. Tax
imposition also provides a wide range of impact over the nation's economic condition. In the
referred case study of sugar of the UK, the imposition of the tax regime also affects the producer
of the products and services within the industry. Government of the UK forced a high tax rate
over the manufacturing of sugary related drinks. If such types of soft drinks are produced or
imported in the UK then it attracts the applicability of the high tax rates to the production of said
products. UK tax rates having the two slab rate such as lower rates and higher rates. The lower
slab rate is a tax rate that is charged on soft drinks that contain sugar more than 5ml in a can of
330 ml, such as sprite and Thums up. This would add 6p to the price of 330 ml Can of sugary
drink. The additional slab rate is the one that is collected on soft sugary drinks that contains
sugar of 8ml or more than 8ml in a can of 330 ml, such as for drinks like Pepsi and Coca Cola
(Britishsoftdrinks, 2016). Therefore in order to avoid such kind of high tax rates applicability
proper and effective developed strategies by the management should be incorporated within the
business so that both the elements such as increased tax rates and production of the sugar
contained soft drinks can be reduced simultaneously in an optimum manner. In order to keep
away from the high tax rate within the production department, the company decreases the sugar
content in consumable soft drinks, therefore, the company decreases the sugar content less than
5ml in the 330 ml can. Correspondingly, producers of Pepsi and Coca Cola are probably to
diminish the sugar content less than 8ml in a can of 330 ml. That is the main proposal from the
government side to reduce the sugar contained and this recommendation should be followed by
the management of the company in order to increase the earning efficiency of the business. So it
can be said the government also provides some direction in order to address the market failure.
The government helps in identifying the main reasons of such market failure, The government
addresses the market failure by incorporating the effective policies rules and regulations, thus
government plays an instrumental role in establishing the non-failure market along with the
perfect market. Applicability of the high tax rate consequences in minimizing the production
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process of the commodities that additionally declines the earning profits of the business within
the organization which would completely depress entrepreneurship activities. Management is
having the other alternative by enhancing the prices of the sugary drinks so that they can earn the
same as they earning earlier (Arthur, 2018). According to the UK based sugar case study
applicability of the high tax rate by the government also leads in promoting the sports-related
workshops and activities among the society and community that develops the health of the
children and also contributes in reducing the health-related problem such as obesity and diabetes.
Although the government takes the first step by conveying the tax load finally to the end
customers which would surely minimize the excess intake of soft drinks that contained sugar in
high quantity. (Francis, 2016). The proprietor of J. D. Wetherspoons, a famous pub chain,
supposed that high tax rates may increase the cost of the pubs which makes it more complex to
survive in the market. Hence sugar tax is the most excellent policy in order to minimize the
health-related issue and harms.
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Conclusion:
It is hereby concluded from the above report that reports how market changes can produce
effects to the business production and earning capacity. The above report also focuses on the
reduction of the labor wages along with the adverse effect over the entrepreneurial activities that
will further provide a bad impact on the economy of the nation. The report also having a concern
about the increasing problem of obesity among the children due to the excess consumption of
sugar-containing soft drinks. Obesity can be controlled by the applicability of the high tax rates
so that manufacture reduces the content of the sugar from the drinks. Therefore proper
management in order to form strategies to cope up with the above-mentioned problems and
issues should be focused within the organization as per the need of society and community.
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References:
 Arthur. R., 2018. UK sugar tax. [Online] Beveragedaily. Available at:
https://www.beveragedaily.com/Article/2018/07/17/UK-sugar-tax-326-businesses-hit-by-soft-
drinks-industry-levy?utm_source=copyright&utm_medium=OnSite&utm_campaign=copyright
[Accessed on 4th May 2019]
 British soft drinks. 2016. The ECONOMIC IMPACT OF THE SOFTDRINKS LEVY. [Online]
Britishsoftdrinks. Available at:
http://www.britishsoftdrinks.com/write/MediaUploads/Publications/The_Economic_Impact_of_t
he_Soft_Drinks_Levy.pdf [Accessed on 4th May 2019]
 Buckton, C.H., Patterson, C., Hyseni, L., Katikireddi, S.V., Lloyd-Williams, F., Elliott-Green,
A., Capewell, S. and Hilton, S., 2018. The palatability of sugar-sweetened beverage taxation: A
content analysis of newspaper coverage of the UK sugar debate. PloS one, 13(12), p.e0207576.
 Cotton. B., 2018. HOW THE UK SUGAR TAX IS AFFECTING THE ECONOMY AND
BEVERAGE COMPANIES. [Online] business leaders. Available at:
https://www.businessleader.co.uk/how-the-uk-sugar-tax-is-affecting-the-economy-and-beverage-
companies/42937/ [Accessed on 4th May 2019]
 Francis, N., Marron, D.B. and Rueben, K.S., 2016. The Pros and Cons of Taxing Sweetened
Beverages Based on Sugar Content.
 Pell, D., Penney, T., Hammond, D., Vanderlee, L., White, M. and Adams, J., 2019. Support for,
and perceived effectiveness of, the UK soft drinks industry levy among UK adults: a cross-
sectional analysis of the International Food Policy Study. BMJ Open, 9(3), p.e026698.
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