Question 3 (25 marks) A sugary drink tax or soda tax is a tax designed to reduce consumption of sweetened beverages like carbonated soft drinks. We have heard arguments from those opposing this tax and those supporting the tax. The argument of opponents: tax causes deadweight loss, and therefore is bad for the society. The argument of supporters: sweetened beverages increase the health risk like obesity. Society needs to pay extra cost to tackle these health issues. Thus, sweetened beverages has negative externality and a tax helps correct the situation, and therefore is good for the society Assuming that the tax is imposed on sellers, a. Explain the argument of the opponents using a clearly labeled demand-supply diagram. b. Explain the argument of the supporters using a clearly labeled demand-supply diagram. Question 4 (25 marks) a. Explain the concept of non-rivalness and provide examples. b. Explain the concept of non-excludability and provide examples. Question 5 (25 marks) Discuss the pros and cons of introducing the sales tax in Hong Kong. Question 6 (25 marks) a. Explain the concept of substitution effect in the context of income tax. b. Explain the concept of income effect in the context of income tax.
Question 3 (25 marks) A sugary drink tax or soda tax is a tax designed to reduce consumption of sweetened beverages like carbonated soft drinks. We have heard arguments from those opposing this tax and those supporting the tax. The argument of opponents: tax causes deadweight loss, and therefore is bad for the society. The argument of supporters: sweetened beverages increase the health risk like obesity. Society needs to pay extra cost to tackle these health issues. Thus, sweetened beverages has negative externality and a tax helps correct the situation, and therefore is good for the society Assuming that the tax is imposed on sellers, a. Explain the argument of the opponents using a clearly labeled demand-supply diagram. b. Explain the argument of the supporters using a clearly labeled demand-supply diagram. Question 4 (25 marks) a. Explain the concept of non-rivalness and provide examples. b. Explain the concept of non-excludability and provide examples. Question 5 (25 marks) Discuss the pros and cons of introducing the sales tax in Hong Kong. Question 6 (25 marks) a. Explain the concept of substitution effect in the context of income tax. b. Explain the concept of income effect in the context of income tax.
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Transcribed Image Text:Question 3 (25 marks)
A sugary drink tax or soda tax is a tax designed to reduce consumption of sweetened
beverages like carbonated soft drinks. We have heard arguments from those opposing this tax
and those supporting the tax.
The argument of opponents: tax causes deadweight loss, and therefore is bad for the society.
The argument of supporters: sweetened beverages increase the health risk like obesity.
Society needs to pay extra cost to tackle these health issues. Thus, sweetened beverages has
negative externality and a tax helps correct the situation, and therefore is good for the society
Assuming that the tax is imposed on sellers,
a. Explain the argument of the opponents using a clearly labeled demand-supply diagram.
b. Explain the argument of the supporters using a clearly labeled demand-supply diagram.
Question 4 (25 marks)
a. Explain the concept of non-rivalness and provide examples.
b. Explain the concept of non-excludability and provide examples.
Question 5 (25 marks)
Discuss the pros and cons of introducing the sales tax in Hong Kong.
Question 6 (25 marks)
a. Explain the concept of substitution effect in the context of income tax.
b. Explain the concept of income effect in the context of income tax.
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