Answer to Question #298192 in Microeconomics for Darbie

Question

You have been contacted as a policy expert to very briefly, advice government to institute food tax policy based on the following policy objectives:

(a) The government has the policy objective of raising tax revenue on foods? (5 Marks)

(b) The government has policy objective of changing the consumption behavior of citizens by taxing food?

Answer 1

a) The government has the policy objective of raising tax revenue on foods?

The choice of food consumption by consumers is influenced by taxation and income. A policy that changes prices will affect consumers' decisions on food choices. If the government imposes food safety regulations, food production will likely reduce. Subsequently, the regulations may cause an uproar of market prices, thus decreasing consumption. Government steps to raise tax revenue on food may not be ethically right. Conversely, it should promote the food industry to process healthy food. Government has the mandate to intervene due to its authority and resources. Therefore, instead of introducing tax revenue on food, it should promote a nutritional policy.

(b) The government has policy objective of changing the consumption behavior of citizens by taxing food?

Taxing food to change consumption behavior is a better way of controlling chronic illness that affects a higher demographic percentage. Numerous foods are the root cause of heart diseases, cancer, obesity, and high blood pressure. Consumption is ultimately a personal choice, and taxation help individuals to choose nutritious foods. The government should increase taxation on non-organic foods while reducing taxes on organic food to promote healthy eating. Moreover, taxation on specific food reduces the risk that people might encounter in the future, like chronic illnesses. The shape of demand for food products should be the area government imposes taxation. For example, those sweetened products already have a ready-made market.