The World Health Organization urged countries to impose a tax on sugary drinks in order to battle the growing obesity. Sugary drinks are an example of negative externality of consumption, because as the result of their consumption we have external cost in the form of suffering third party (tax-payers) who have to pay for the obesity treatments of sugary drink consumers. Sugary drinks are considered to be demerit goods, which are undesirable for consumers due to their harmful effects such as diabetes, obesity and tooth decay, but which are overconsumed by the market. Overconsumption of demerit good is the market failure. The reason for overconsumption is that the good has negative externality consumption, and because of that the market over-allocates resources for its production.
Basing our research on Tariffs as being one of the most significant tax commodity we shall be able to analyze the different ways they impact the world trade (Bernhofen et. al 36). Tariffs in most cases limit or restrict imports through raising the prices of services and goods bought from overseas or other states, and thus this makes them less competitive on the domestic market. As mentioned earlier, governments from different countries can impose tariffs to increase revenues for protection of local industries from foreign competition. It is achieved through increases the prices of foreign-produced goods and thus prompting the consumers of that particular country to value or buy products from their domestic industries.
The tax is likely to be regressive. Also putting cost on “sugary drinks” is very difficult, because it is difficult to distinguish between sugar sweetened drinks and non-sugar sweetened drinks for example if you take sugar with your tea, is it referred to a sugar sweetened drink? On the supply curve, a tax moves the curve to the left. But, the impact of tax depends on the elasticity of demand. If demand is elastic, there will be a small fall in demand if higher tax is imposed.
Price-fixing: Neo-classical economists regard price-fixing as inefficient market behavior. Price fixing could go one of two ways. One where the prices increase which will refer to as scenario 1. Two prices decrease we will call this scenario 2. Both scenarios have major drawbacks, with scenario 1 the price increase would decrease consumption.
“A good whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves” they are often overused because people aren't fully aware of the negative effects their consumption creates. They often create
2. To promote redistribution of income and wealth. 3. Decrease consumption/production of goods with negative externalities or demerit goods Disadvantages of Taxation 1. Decrease tendency to Spending • Indirect taxes (eg VAT, Excise Duties) make goods more expensive, reducing demand 2.
There is domestic and international inequality. ANALYSIS Corruption does not only affect the growth rate of income but also affect inequality and poverty. Corruption affects poverty by first impacting on economic growth factors. Corruptions will lead to lower economic activities, creates inefficient by increasing the business thus hinders income inequality then leads to poverty in economic. In the economic model, corruption discourages foreign and domestic investment (Chetwynd E, Chetwynd F and Spector B 2003).
This cause a rise in consumers spending and shift the aggregate demand curve to the right (Pettinger, T., n.d.)(Refer to Diagram E). Diagram E Furthermore, by introducing GST in Malaysia, the business cost and production cost will be lowered down. This is due to GST paid on the business inputs is claimable. (Ng, Tuam, & Dr Aik, 2014). As compare to the previous taxes, many businesses need to pay multiple taxes and higher levels of tax-on-tax (cascading effect).
According to Gerring, et al (2005), democracy has a negative effect on our economic growth. This is because there are many problems in estimating the impact of democracy on growth; it is not a key to economic growth, due to the concern of the difficulty in initiating drastic economic reforms (Leftwich, 2005). Impact of elections on Economy Political elections also have an influence on the prices and interest rates. Kaplan (2006) maintains that competitive elections in a democratic state lead to unfavourable economic outcomes like inflation. Politics in Kenya had a causal sequence on their economy due to violence that occurred in the 2007 elections.
Governments introduce these bans in an attempt to correct the market failure of unequal distribution of incomes; where those on lower incomes get hit harder by the rise in the price. From an economist’s point of view, bans are a bad idea. They create a price ceiling below the equilibrium after the demand increase. The excess demand can cause queues so consumers pay in waiting time instead of higher prices. It can also lead to suppliers allocating the goods to their family and friends or can even lead to a black market where consumers buy up the market and sell at higher prices to earn a profit.