Within modern society, it is crucial to be acknowledged about the core principles of the economic theory and its implications on every aspect of daily life. According to Mankiw, there are four key economic concepts, including “scarcity, supply and demand, costs and benefits, and incentives,” which illustrate the underlying reasons for purchasing choices (24). Such concepts are closely intertwined with the development of tax policies within contemporary governments. Both videos demonstrate the implementation of tax policy regarding soda drinks and plastic bags and how they help the community and create a crucial consumer behavior change.
More specifically, the Philadelphia soda tax implied an excise tax of 1.5 cents per ounce on sugar drinks and synthetically sweetened beverages to increase revenue for education purposes. The tax aimed to reduce the high demand for sugar-sweetened beverages and achieved a significant decline in beverage sales in Philadelphia (CBS Evening News). However, as the current economic market is driven by supply and demand, the tax led to a rapid increase in soda sales outside the city by 38% due to cross-border shopping (Mankiw 26). Despite the primary aim to decrease obesity in the state by raising the taxes and subtracting the incentives, Philadelphia’s beverage tax adversely impacted the small business community.
The tax caused a significant scarcity of jobs and enormous economic losses on local businesses. According to Gladstone, the tax policy would be more effective if the charge was salient and consumers were more deterred from increasing the consumption of sugar or plastic bag purchases. Concerning plastic bag investment, it imposes a cost on other people in society not reflected in the bag’s price. However, the plastic bag tax policy is considered effective as it has the environmental implication essential for society. The tax promoted a significant drop in plastic bag sales by 86% (Gladstone). After the small charge is adopted, the consumers usually avoid the financial loss of paying for the bag, which shapes the changed consumer economic behavior. Therefore. by increasing the tax and the price for a single plastic bag, the tax aims to lower the demand for the product posing a critical environmental impact and eliminate single-use plastic pollution.
Works Cited
“Joe Gladstone on BBC World News: Behavioral Economics of Plastic Bag Tax.” YouTube, uploaded by Joe Gladstone, 2016.
“Philly Residents Sour about Soda Tax.” YouTube, uploaded by CBS Evening News, 2017.
Mankiw, N. Gregory. Principles of Economics. Cengage Learning, 2020.