Question

1. The average weight of American adults increased by about 10 pounds in the 1990s. In November 2004, it was reported that U.S. airlines spent $275 million more in fuel costs to transport this additional weight. a. If airlines must spread out the cost of transporting obese people over all passengers, including those who are slim, would this increased cost be an externality of obesity? Assume that obesity does impose a negative externality and the main cause is high sugar intake, use a demand and supply model to illustrate the market outcome and the socially optimal outcome. Consider three policy options: 1) a sugar consumption tax, 2) a regulation requiring restaurants to display calories on their menus, and 3) Banning soda and junk foods from public school cafeterias, illustrate the effect of each policy with a demand and supply model. Discuss the efficiency and equity implications for each policy b. c.

Answer 1

a. If airlines enhance the prices of transporting including obesity and slim persons then it impacts will be gone wrong. The outcome of positive from obesity either may yield the results or not but the slim persons will have a chance to turn to get a weight. So, the expanding of transporting cost for all the kinds of passenger’s weight will not work effectively moreover it will get a negative impact.

b. The main negative thing is high sugar intake of obesity people because of the lack of awareness about the health later how they will face the issues in the future. The government will not go with reducing the supply in the market for reducing the sugar consumption. The government will do more awareness about the proper usage of sugar and its diet so it may have chances to each one concentrates their loosing of their overweight. It will give good results instead of reducing the supply of sugar in the market.

c. As per the given in the question, there are three policy options:

1) a sugar consumption tax

2) a regulation requiring restaurants to display calories on their menus

3) Banning soda and junk foods from public school cafeterias.

Let us discuss the above each policy individually.

1) A sugar consumption tax: sugar consumption will be related to supply, suppose the availability is less quiet opposite to demand then it showing negative impacts on the economy of the country means GDP (Gross Domestic Product) percentage. So, the supply needs to meet their respective demand but the awareness needs to spread among the public for their health and how they will be affected with diseases.

2) A regulation requiring restaurants to display calories on their menus: it’s really a great help to the people to get aware of the calories to see on the menus with respective items. For example, take the example of 50 persons regularly taking cakes so it may reduce at least 20 persons when they mentioned calories for the cake. It really works well in a long period of time but initially, the result will get less.

3) Banning soda and junk foods from public school cafeterias: the banning of soda and junk foods will not resolve the issue permanently and moreover it may again impacts showing on the economy of the country. So, the government gives instructions to all the vendors to replace organic food in the place of junk food. So the children will get more healthy & fit and gone away completely from junk food. This is the way is good to keep the countries economy well and stay fit the school children.