Name of the article: Colombia passes ambitious “junk food law” to tackle lifestyle diseases.

Source/Link:https://www.theguardian.com/global-development/2023/nov/10/colombia-junk-food
-tax-improve-health-acc
In bullet points respond to following:
Identify key economic terms that you will define (maximum 2)
Negative Externality of Consumption - Spillover negative impact on the third party due to an economic
transaction/ in this example due to the consumption of junk food.
Indirect (Pigouvian) Tax - A tax imposed on demerit goods, essentially to decrease/ discourage its
consumption in a market.
What is the central theme of the article (this will form an introduction to your commentary)?

The market is overproducing junk food, however due to the junk food being a demerit good, by where it
produces a negative externality of consumption, the government intervenes into the market by implying
health taxes onto the junk foods, to discourage its consumption.

Summarize main points from the article in your own words

The Colombian government is imposing a health tax of 10% in 2023, 15% in 2024 and 20% in 2025,
which aims to reduce and discourage the consumption of ultra processed junk foods. They also plan to
reduce the Value Added Tax (VAT) on healthier foods to subsidize and help encourage their consumption.

As they have seen high levels of sodium, salt levels, and saturated fats, directly leading to increased levels
of cardiovascular diseases, strokes and heart failures, which have accounted for a quarter of the deaths
annually, and also leading to other non-communicable diseases such as diabetes and high blood pressure.

What will be your evaluation points? ( Do not repeat evaluation from the article)

The good that is being taxed, will hence be relatively more expensive, which will help discourage the
consumption of the good. Leading to the difficulty of how to measure the value of the external cost? How
do we measure who is affected, and furthermore how do we determine the level of tax to imply on the
Ultra Processed Junk Food. Taxing industrially manufactured ultra processed ready to eat foods is that
they have an inelastic demand. Its impact on the stakeholders must be measured (Government, Workers,
Producers, Consumers, The Society and the overall market)
How is the concept you identified linked to the article (write at least 4 bullet points)

The key concept I have identified is CHOICES, due to the high consumption of ultra processed foods, the
government has to intervene in the market by implying an indirect Pigouvian tax, to discourage the
consumption of ultra processed foods.

Which economic theory will you connect the article to?

Negative Externality of Consumption, Market Failure, Indirect Pigouvian Tax.

How many diagrams will you include and which ones?

Two diagrams, firstly the negative externality of consumption and secondly the diagram of indirect taxes
being implied on a market.

What will be your main arguments?

My main argument will be to minimize or remove any welfare loss caused by the implication of the
indirect taxes applied onto the ultra processed junk foods.

How will you evaluate the information in the article and what judgment will you make based on the
evidence?

Evaluate the effect on the different stakeholders such as, the consumers, the producers, workers,
government, society and the market. Then weighing out all of the pros and cons to decide whether it is
most efficient to imply a indirect tax.

What will be your conclusion?

Health taxes are one of the many methods to discourage and decrease the consumption of ultra processed
junk foods, however there are other methods such as awareness campaigns, nudging and regulations.
Screenshot Of My News Articles
Name of the article: Tobacco smuggling to Spain stokes resentment over Gibraltar

Source/Link: https://www.ft.com/content/89c5a2c8-99be-43b3-9a12-22e7eefdea55
In bullet points respond to following:
Identify key economic terms that you will define (maximum 2)
Negative consumption externality - product of social costs, or the cost of an affected community, being
more expensive than private costs.
Indirect Tax - indirect tax is the amount of money given to the government upon the consumption of a
good or service.
What is the central theme of the article (this will form an introduction to your commentary)?
Negative externality of consumption through smoking, higher set minimum (price floor) however can't
solve negative externality, due to cheaper price in neighboring countries therefore leading to smuggling.
Summarize main points from the article in your own words
The article discusses the persistent issue of tobacco smuggling between Gibraltar and Spain, causing
strain in their relations. Cigarettes are cheaper in Gibraltar due to tax exemptions, prompting smuggling
gangs to sell them in Spain for profit. Spanish customs officials estimate significant revenue losses of
approc 400mn euros (welfare loss) due to this illegal trade. Gibraltar asserts efforts to combat smuggling.
Despite measures taken by both sides, smuggling persists, impacting relations and prompting concerns
over criminal activity and revenue loss.
What will be your evaluation points? ( Do not repeat evaluation from the article)
Due to high prices for cigarettes in Spain, an illegal underground will be produced, as can be seen in the
article, this illegal trade leads to a welfare loss for the government of spain of approx 400mn euros. Hence
the government is worse off, and the negative externality/ external cost still continues to persist.
Consumers are able to get cheaper cigarettes, and hence the spain producers will be worse off, as they will
lose out on their customer base. Government intervention of higher minimum prices is therefore
redundant and futile.
How is the concept you identified linked to the article (write at least 4 bullet points)
Efficiency, Resources are efficiently allocated in the market, leading to a market failure
Choice, this gives the consumer choice on whether they should buy through illegal market or through the
shops
Which economic theory will you connect the article to?
Negative Externality of Consumption, Market Failure, Indirect Pigouvian Tax.

How many diagrams will you include and which ones?

Negative Externality of consumption
Minimum (price floor)

What will be your main arguments?

My main argument will be to minimize or remove any welfare loss caused by the smuggling of illegal
cigarettes.
How will you evaluate the information in the article and what judgment will you make based on the
evidence?
Evaluate the effect on the different stakeholders such as, the consumers, the producers, workers,
government, society and the market. Then weighing out all of the pros and cons to decide whether it is
most efficient to imply an indirect tax.
What will be your conclusion?

The policy of minimum price in the market is not working, and hence leads to a welfare loss for the
spanish government, the economic wellbeing is then also affected due to the fact that government revenue
is manipulated and the external cost is not decreasing despite all attempts made by the spanish
government.