Chapter 7 & 8 (Reflection Assignment)

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ECON 1101

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Jan 9, 2024

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Steve Wainaina Professor Das Microeconomics 12/03/2023 Question 1 (1 point) The addition of calorie warnings through front-of-package labels aims to combat the negative externality of rising obesity rates by addressing poor dietary choices. The study, based on the Chilean experience, the study revealed a decrease in sugar and caloric intake following the implementation of FOP warning labels. Question 2 (1 point) Adding labels is supported for promoting consumer awareness, healthier choices, informed decision-making, and encouraging industry accountability through product reformulation. However, arguments against labels cite concerns about their effectiveness, potential limitations on consumer choice, the risk of stigmatization, industry opposition, and the possibility of complexity causing confusion. I personally have actually started looking at the labels of the foods that I am buying. I personally have, even if it is the same product but I know one brand is cleaner than another. I think that labels do work, if people see warnings, it will definitely discourage to purchase things. Question 3 (1 point) Firms, in response to front-of-package labeling policies as observed in Chile, are adjusting products to reduce critical nutrients. This enhances the policy's health impact and effectiveness and builds consumer trust. Anticipating industry behaviors helps policymakers refine regulations for a balanced approach that promotes health without limiting consumer choice. Question 4 (2 points) The authors analyze Chile's front-of-package (FOP) warning-label policy implemented in 2016 to address obesity. This policy mandates warning labels on products exceeding set thresholds for calories, added sugar, saturated fats, and sodium. Utilizing scanner-level data from Walmart, covering transactions from May 2015 to March 2018, and nutritional information from a survey, and pre- and post-policy data, the study assesses the impact of the FOP labels on consumer behavior and product reformulation. Question 5 (2 points) The Chilean front-of-package warning labels led to a notable decline in consumer sugar and caloric intake, signaling positive dietary changes. Food manufacturers responded by reformulating products to align with the policy's goal of promoting healthier options. The study underscores the dual impact on consumers and suppliers in evaluating front-of-package labeling policies.

Chapter 7 Vocabulary Health Care : goods and services, such as prescription drugs, consultations with a doctor, and surgeries, that are intended to maintain or improve person’s health. Health I nsurance : a contract under which a buyer agrees to make payments, or premiums, in exchange for the provider’s agreeing to pay some or all of the buyer’s medical bills. Single-Payer Health care system : the government provides health insurance to all residents, funded through taxes. Private companies provide the care. Individuals pay nothing out-of-pocket for services. ex: Canada. Universal Health Insurance : every resident is required to enroll in a nonprofit health insurance society or enroll in the national government’s program. Individuals have substantial copayments. ex: Japan . Socialized Medicine : a health care system under which the government owns most of the hospitals and employs most of the doctors. Some (>10 percent) people supplement with private health insurance. ex: United Kingdom. Symmetric Information : a situation in which one party to an economic transaction has less information than the other party. Market Failure : the inability of the market to maximize economic well-being. Adverse Selection : the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. Moral Hazard : refers to actions people take after entering into a transaction, that make the other party to the transaction worse off. ex: people with car insurance might drive less carefully, knowing they are financially protected if they crash. Principal-Agent Problem : a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them. ex: the insurance company must delegate decision-making power to the doctor, who may not have the same interests as the company.

Chapter 8 Vocabulary Sole Proprietorship : a firm owned by a single individual and not organized as a corporation. Partnership : a firm owned jointly by two or more persons and not organized as a corporation. ex: three friends decide to start an interior designing firm after college. All own equal stake. Corporation : a legal form of business that provides owners with protection from losing more. than their investment should the business fail. ex: I own $100 worth of shares in Waystar RoyCo; Waystar RoyCo declares bankruptcy. I am only liable for the $100 in stock that I own, not their billions of dollars in debt. Asset : anything of value owned by a person or a firm. Limited Liability : a legal provision that shields owners of the corporation from losing more than they have invested in the firm. Corporate Governance : is the way in which an organization is structured and how that affects their day-to-day business. Separation of Ownership from Control : a situation in a corporation in which the top management, rather than the shareholders, controls day-to-day operations. Indirect finance : a flow of funds from savers to borrowers through financial intermediaries such as banks. Intermediaries raise funds from savers to lend to firms (and other borrowers). Direct Finance : the flow of funds from savers to firms through financial markets, such as the New York Stock Exchange. Usually in the form of bonds or stocks. Bonds : a financial security that represents a promise to repay a fixed amount of funds. A bond is financial secu rity that is essentially a loan.

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