Introduction to economics

  Assessment task 2 – Responses to articles - Article 2 “A sugary drinks tax could recoup some of the cost of obesity while preventing it.” S.Duckett and T. Wiltshire (from The Conversation of 23th November 2016) is available at: https://theconversation.com/a-sugary-drinks-tax-could-recoup-some-of-the-costs-of-obesity-while-preventing-it-69052 Access the article at the URL given above and answer the questions in the spaces below. Use full sentences and show all necessary working but do not use more space than is given here. Other references are not necessary but, if you do use any (for example, online economics glossaries) please list at least the URL of your source. Marks are shown and total [15]. (1) According to the article “people on low incomes are generally more responsive to price rises”. Explain in your own words what this means in terms of the concept of price elasticity of demand. (2) If “Government put a tax on sugar-sweetened beverages”, what are the effects on the total welfare? Use the simple demand and supply diagram below to illustrate and explain the changes in CS, PS and Government revenue if a tax was imposed on soft drinks in Australia. (3) Complete the diagrams below to explain and illustrate the effect on equilibrium price and quantity of a subsidy on healthy foods such as fruit and vegetable in two cases; when the elasticity of demand for such foods is [4] a) relatively inelastic, b) relatively elastic.