1.

Negative externality is an economic activity that imposes a negative effect on third

parties. (k) Diabetes cause more than 70,000 deaths per year, (ap)pressurizing the NHS
to spend more as 10% of their budget already going to treating the disease. (ap) People
with diabetes aren't the only sick people in the UK, but treating them limits the funds for
the other equivalently serious treatments,(an)

4/4

2.

4/4

3.
Assess the case for an increase in taxation of sweetened foods and drinks as a means
of reducing the negative externalities consumption (12)
Negative externality is an economic activity that imposes a negative effect on third
parties. Sweetened food and sugary drinks cause obesity and type 2 diabetes
overwhelming the already pressurized NHS to provide treatment. Inorder to try
reducing obesity and diabetes, the NHS is imposing indirect taxes on the
high-sugar containing goods sold in their cafes and vending machines. Indirect
taxes are imposed on suppliers, and so, if suppliers decide to pass on the burden
to the consumers, then prices will increase, decreasing demand, thus theoretically
reducing diabetes, however hospital cafe’s consumer base consists mostly of
doctors and nurses, most of which make too much money to care for the 5 pound
increase in their lunch and so, demand might not alter and people will continue
getting fat.

Once indirect taxes are implied demand will reduce thus disincentivizing the
supplier to supply to the NHS hospitals as they are losing customers due to the
tax, when they can supply to other places and gain more revenue without being
taxed and so cafe’s will stop renting in the hospitals and the NHS will not just stop
getting tax revenue, but rent revenue too. However, the NHS can provide its own
cafe that provides consumers with only healthy options and thus getting rid of the
source of the problem, however opening a cafe comes with the opportunity cost of
spending on treatments instead.