Cash strapped Romania to introduce ‘fat tax’

Romania hopes to battle their increasing problems with obesity by introducing a ‘fat tax’ on all fatty, salty and sugary goods. But are they really worried about an unhealthy population or is the tax just another way of reducing the Romanians budget deficit?

As it is expected to rake in £680 million, it looks like the government is trying to take advantage of demand being price inelastic for fatty goods.

This is a fantastic example for a lesson on negative externalities, fiscal policy or price elasticity of demand. Click read more for some GCSE style questions to go with the article.

———————————————-

1. Define price elasticity of demand. (2 marks)

2. Explain why the Romanian government is considering introducing a fat tax (5 marks)
Topics to consider: Negative externalities, price elasticity of demand

3. ‘Goods which contain large amounts of fat should be taxed.’ Do you agree with this statement? Give reasons for your answer. (6 marks)
Topics to consider: Negative externalities, regressive nature of indirect taxes, income for the government, price elasticity of demand