Excessive sugar consumption is a primary driver of childhood obesity and related long-term health complications such as type-2 diabetes. Alarmingly, global consumption rates of sugar-sweetened beverages (SSBs) remain exceptionally high despite public health campaigns. Some estimates suggest that over 65% of sugar-dense beverages consumed worldwide are purchased by lower-middle-income households. (lines 1–5)
To counter this epidemic, several nations have implemented a sugar tax. A tax increase that raises the average retail price of SSBs by 20% decreases consumption of these drinks by 8% among high-income households and by 16% among low-income households. (lines 6–10)
However, the beverage industry fights back with heavy marketing budgets. Additionally, the emergence of zero-calorie sugar substitutes and fruit juice alternatives creates a complex market dynamic where consumers easily shift their preferences, of which the long-term health impacts are still actively studied. (lines 11–15)
With reference to Extract B, lines 7–10, calculate the price elasticity of demand for sugar-sweetened beverages (SSBs) among high-income households and among low-income households. You are advised to show your working.
119 exam-style questions on Edexcel A A Level Economics 1.2.3 Price, income and cross elasticities of demand. Each one has a worked solution and a mark scheme showing where the marks go.