I too studied economics, but many products have an inelastic demand curve. That is, consumption is not much influenced by price. For example, I think the demand curve for beer would be a straight line. The other consequence of taxing products is the development of secondary markets for the product - in the most extreme case this will be a "black market". If you think of products like heroin, cigarettes, the bodies of young women, you will see that no amount of taxation, regulation or prohibition will seriously alter demand. The strongest force of all is demand and supply and no amount of market interference will prevent equilibrium in the long run!
Actually, I doubt very much whether the demand curve for beer would be flat. Even the demand curve for petrol is not flat; an increase in the price of petrol does lead to a decrease in consumption. There is a direct correlation between the increase in the price of petrol and the increase in the sale of small cars and the decrease in the sale of gas guzzlers. Any car salesmen will tell you this.
But when it comes to obesity, applying a tax on certain unhealthy products is just one of a range of ways that may affect demand. According to a lot of posts on this thread, it is people of a lower socio-economic background that are over represented in the consumption of junk food. Make the junk food more expensive, and perhaps the people who have the obesity problem may direct a portion of their food expenditure elsewhere.
Sorry, I should have said almost flat. As for petrol, I'm sure many people could give up petrol, but not beer. most demand reactions to price rises in these types of products are small and transitory!
We have to leave beer out of the equation; it's one of those products that distorts the market and leads to irrational exuberance
We have to leave chocolate out of the equation too.
Yeah beer and pizza are allowed. Burp!!!!!
U can work off the calories with some sexercise.
[ Edit: Edited on Nov 28, 2007, at 1:53 AM by Mel. ]
The next lecture will be: "Price Discrimination by Product Type"