| Premium Energy Brand | Mid-range Energy Brand | Supermarket Own-brand | |
|---|---|---|---|
| Gym / Vending Machine | £2.80 | £2.20 | N/A |
| Local Convenience Shop | £1.99 | £1.50 | £0.85 |
| Asda Supermarket | £1.50 | £1.10 | £0.45 |
| Tesco Supermarket | £1.55 | £1.10 | £0.45 |
Note: Prices are adjusted for equivalent 500ml servings to allow direct comparison.
Along with tobacco and alcohol, sugar-sweetened energy drinks are classified by many economists as demerit goods due to high external costs, including dental decay, childhood obesity, and type 2 diabetes. The British Dental Association (BDA) recently stated that nearly a third of tooth extraction procedures in children could be avoided by a 20 per cent tax increase on high-sugar drinks. The BDA suggests that rather than a flat levy, taxes should scale progressively with sugar density.
The BDA has also backed campaigning groups urging the Government to ban volume-based promotions, such as 'buy-one-get-one-free' (BOGO) deals and loss-leader pricing where discount supermarkets sell multipacks at a loss to drive footfall. An obesity campaign representative warned: "We have a public health crisis and people need to be prepared to look at an increase in price. They may not want to pay more but they also don't want to see their children, their friends and their neighbours suffering from chronic health conditions in their 20s and 30s." Critics argue that successive governments have been hesitant to implement strict price-controls due to aggressive lobbying by multinational beverage brands.
Currently, the UK Soft Drinks Industry Levy (SDIL) charges up to 24p per litre for drinks with 8g of sugar per 100ml, but many campaign groups argue this does not go far enough given the persistent low health-literacy in poorer regions and the wide availability of ultra-cheap alternatives on supermarket shelves.
In a market economy, is it right for the state to artificially inflate the price of soft drinks? Proponents of the free market argue that while we may want to discourage unhealthy eating habits, it is naive to assume that the 'energy drink habit' among adolescents is highly price sensitive. Moreover, taxing these products unfairly penalises responsible, low-income consumers who enjoy these drinks as an occasional, affordable treat.
Instead of market-distorting price interventions, policy should focus on culture and behavioural change. While many major retailers have voluntary policies restricting sales of high-caffeine energy drinks to under-16s, enforcement varies wildly in smaller independent convenience stores.
A major supermarket spokesperson noted: "We operate in a highly competitive market where low prices are vital to our customer proposition. Unilateral price hikes would lead to commercial failure as customers migrate to rivals. Any price floors must be mandated legally across the whole industry to maintain a level playing field."
Evaluate possible economic policies, other than banning sales to under-16s, that a government might use to reduce significantly the consumption of sugar-sweetened energy drinks.
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.