Answered: 2. Sweet taxes make the world sweeter!…

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter13: Medicaid

Section: Chapter Questions

Problem 3QAP

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2. Sweet taxes make the world sweeter!

According to a study conducted by the World Health Organization, noncommunicable diseases, such as heart disease, cancer, diabetes, chronic lung disease, and stroke, are the main leading causes of deaths—almost 90% worldwide. These diseases also have social and economic costs. Cardiovascular diseases, for example, cost the economy of the European Union about 210 billion Euro in 2015.

One method some European countries adopted to try to reduce the death rate from those leading causes was to impose high taxes on sugar-sweetened beverages.

Assume that your next president loves the idea of sugar taxes and proposes a 30% tax on all sugary beverages in the country. And assume you are a marketing manager at a company that makes sugary soft drinks. The owner of the company heard the news and came to you for advice and asked you the following questions:

So, buddy, should I be worried about our business if this sugar tax policy is implemented? Why?
How do you think consumers will respond to this sugar tax proposal if it is enacted?
What do you think we need to do to ensure we’ll still make profits and can continue to take advantage of the market we operate in?

Expert Solution