Australia is considered as one of fattest nations in this developed world. National Heart Foundation of Australia (2012) findings illustrate that nearly …show more content…
This is supported by Hubbard et al. (2013, p. 130) who state that government interventions attempt to increase market’s economic efficiency. The government can impose a fat tax that equals to the obesity cost to eliminate the negative externalities. Figure 2 shows that taxation will drive the supply curve up from S1 to S2. Price goes up from P1 to P2 and deadweight loss is internalised. Taxes on unhealthy food may encourage people to lower their consumptions and suppliers to produce less unhealthy food. This fat tax will raise the cost of unhealthy food and reduce the quantity being exchanged in the market. As a result, the market may produce at an efficient equilibrium …show more content…
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