Application Of Economics In Our Fight Against Diabetes

During this year’s National Day Rally Speech, Prime Minister Lee Hsien Loong announced our national war against diabetes, which is considered a worrying health issue in Singapore. It was mentioned in his speech that the government would be considering introducing a sugar tax to reduce the sugar intake, alongside other measures like campaigns to educate Singaporeans on the health risks of sugar over consumption.

Reduce Overall Sugar Consumption through Higher Price

Students who have signed up for an economics tuition by a qualified economics tutor may have learned about tax under government intervention. With the sugar tax imposed, products containing higher level of sugar are subject to higher tax, and hence the prices of these products will be higher. As you have been taught by your economics tutor during economics tuition, there is an inverse relationship between price and demand. The higher the price, the lower the demand. Therefore, the implementation of a sugar tax will effectively reduce the overall sugar consumption and mitigate the diabetes problem we are facing.

The effectiveness of a sugar tax is proved in reality in other parts of the world. According to an article published in a British Medical Journal, the consumption of sugar sweetened beverages dropped after a tax was imposed in Mexico. Please approach your economics tutor for a detailed analysis of this case.

Greater Impact on Low-income Households

Similar to Goods and Services Tax (GST), sugar tax is regressive in nature, which means, household receiving lower income will be affected to a greater extent. This is because low-income households spend a larger proportion of their income on the food and drinks containing sugar, as compared to high-income households. You may consult your economics tutor in economics tuition for an explanation of why GST and sugar tax are regressive in nature. Compared to households with high income earning power, low-income households also tend to consume more food and drinks laden with sugar, which are generally much cheaper than their healthy / organic alternatives. Therefore, sugar tax will serve as a solution more targeted at the low-income households, who are usually less concerned about their health and weight as compared to their wealthy counterparts.

Possible Side Effects

Every economic policy has its positive and negative effects. The possible side effects of a sugar tax could be as follows:

Financial Burden on Low-income Households

Some food and drinks containing sugar might be necessity goods. Students have been taught by their economics tutor during economics tuition that demand for necessity goods is price inelastic. Therefore, a sugar tax may not be very effective in reducing consumption if it is imposed on necessity goods. On the contrary, it will result in heavier financial burden due to the higher price and hence the higher spending on these food and drinks. This is especially true for low-income households to whom spending on necessity goods constitutes a large proportion of their disposable income.

Unnecessary Waste on Resources to Determine the Sugar Level

In theory, the sugar tax should be in proportion to the sugar level in the food and drinks. However, in reality, how do we determine the sugar level? This is an interesting topic for discussion in economics tuition with your economics tutor. I am sure experts will find reliable methods to determine the sugar level and tax rate. The question is, will it involve unnecessary waste on resources in order to determine the sugar level in various food and drinks?

This calls for a good debate and I am confident the government will work out the details of the sugar tax after weighing carefully the various different factors at work.

Linda Geng

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