The consumption of ultra-processed foods (UPFs)—such as sugar-sweetened beverages, ready meals, and highly refined snacks—creates significant negative externalities. The high levels of salt, sugar, and trans fats in these products are linked to chronic health conditions including obesity, type 2 diabetes, and cardiovascular diseases. These illnesses impose enormous external costs on publicly funded healthcare systems, such as the NHS, and lead to lost economic productivity due to sickness and premature mortality.
Governments have several policy interventions available to address this market failure. The first is fiscal policy, such as an indirect tax on high-fat, sugar, and salt (HFSS) foods to increase production costs and consumer prices. The second is financial incentives, such as subsidising fresh fruits, vegetables, and whole foods for low-income families. Finally, direct regulation—including banning UPF advertising on television before the watershed, restricting retail promotion of unhealthy foods, or mandating clear "traffic-light" nutritional labelling—can help consumers make more informed dietary choices.
Evaluate government policies that could be used to reduce the consumption of ultra-processed foods (UPFs) and encourage healthier dietary choices. Use at least one appropriate diagram in your answer.
50 exam-style questions on Edexcel A A Level Economics 3.6.1 Government intervention. Each one has a worked solution and a mark scheme showing where the marks go.