“Sugar” Tax’s Impact on Supply and Demand

Subject: Economics
Pages: 2
Words: 344
Reading time:
2 min

It is clear that the introduction of this tax will cause an increase in prices on the corresponding products, which, in its turn, will have an impact on supply and demand. Companies selling these items will try to minimize the increase at the expense of some other costs (for instance, their margins). At the same time, many retailers may try to increase their sales of less expensive items.

Therefore, the supply of carbonated and energy drinks may be affected. As far as consumers are concerned, the price changes will still be apparent irrespective of retailers’ and manufacturers’ actions, so some people may start consuming fewer drinks. This shift will be specifically typical of price-sensitive buyers. The informational campaign aimed at raising people’s awareness of the harm of these beverages will have a certain influence on people’s choices.

However, this impact will be rather limited as the potential hazards associated with energy or carbonated drinks have been discussed in diverse settings. Therefore, it is possible to assume that the demand for these products may undergo quite insignificant shifts. People consuming energy drinks will continue drinking these beverages. This assumption is justified by tobacco use that is still rather high in the UAE and on a global scale.

It is necessary to note that the introduction of the so-called “sugar” taxes will have a certain effect on supply and demand, as well as the price of carbonated and energy drinks. The supply may be slightly changed as less expensive items will earn a larger market share. The demand for these products may face some shifts as people may consume fewer sweetened drinks.

However, the change will not be dramatic as the hazards and harms to people’s health associated with carbonated and energy drinks have been discussed in various settings. People are aware of the negative side of the consumption of these products, and price changes will hardly lead to a considerable change in people’s choices. However, some decrease will be achieved, so the tax may be seen as justified.