| 250ml Can (Brand X) | 500ml Can (Brand Y) | 4-pack 250ml Cans (Brand X) | |
|---|---|---|---|
| City Centre Convenience Store | £1.80 | £2.40 | £5.50 |
| Local Independent Off-Licence | £1.20 | £1.80 | £4.20 |
| Morrisons Supermarket | £0.95 | £1.45 | £3.20 |
| Sainsbury's Supermarket | £0.95 | £1.45 | £3.30 |
Note: Supermarket and independent shop prices are based on typical standard retail shelves before any loyalty card discounts or multi-buy promotions.
Along with high-sugar confectionery and ultra-processed foods, high-caffeine energy drinks are classified by many economists as a demerit good. The British Dental Association (BDA), which represents dental professionals, recently warned that over a third of adolescent tooth decay and sleep-disturbance issues could be mitigated by a significant regulatory intervention, such as a 20% tax on energy drinks containing more than 150mg of caffeine per litre. The BDA suggests that any fiscal measures should be scaled according to both the sugar and caffeine concentration of the beverages.
The BDA has supported proposals to ban multi-buy or 'buy-one-get-one-free' promotions on energy drinks in supermarkets, as well as the practice of selling them as 'loss-leaders' to attract younger shoppers. A representative from the BDA's Health Policy Committee stated: "We have a youth health emergency with high caffeine and sugar dependency. While consumers do not like paying higher prices, they also do not want to see children suffering from chronic sleep deprivation, heart palpitations, and severe dental erosion before they finish secondary school." The Committee argued that the government has been too hesitant to disrupt the lucrative soft drinks market.
In 2023, while the UK Soft Drinks Industry Levy already applies to high-sugar drinks, high-caffeine formulations that are sugar-free bypass this tax completely, despite still causing significant behavioral and sleep-related negative externalities.
In a free-market policy, should the government prohibit cheap energy drinks? While there is an appetite to curb the availability of highly caffeinated beverages that cost less than bottled mineral water, many argue that consumption among teenagers is driven by social trends rather than price elasticity. It is arguably unfair to penalise moderate, adult consumers of energy drinks with high taxes due to the irresponsible consumption habits of a minority.
Instead of price interventions, some argue that better lifestyle education and stricter enforcement of age limits are required. Although major supermarket chains voluntarily sign up to have a 'not for under-16s' sales policy, this is not legally mandated, and some smaller convenience stores routinely ignore the restriction. Should a statutory ban on sales of energy drinks to under-16s be introduced nationwide?
A retail spokesperson commented: "Supermarkets cannot unilaterally inflate their prices for these popular products without risk of losing footfall to competitors. Price coordination is illegal under competition law, so government-level intervention is the only way to establish a level playing field."
Define the term 'demerit good' (Extract B, line 2).
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.