Extract A: In 2018 the UK introduced the Soft Drinks Industry Levy, a tax paid by manufacturers on drinks with more than 5 g of sugar per 100 ml (18p per litre) and a higher rate above 8 g (24p per litre). Sales of drinks liable for the levy fell from 2.20 billion litres in 2015 to 1.54 billion litres in 2019, while sales of low- and no-sugar drinks rose by over 30%.
Extract B: Many manufacturers cut the sugar content of their drinks before the levy started so they would not have to pay it. Critics argue that the levy is regressive and that people simply buy sugar from other foods instead. Supporters point to falling sugar intake among children and say that the revenue (about £300 million a year) funds school sport.
Extract C: Obesity costs the NHS an estimated £6.5 billion a year. Economists argue that consumers underestimate the long-term health costs of sugary drinks, that advertising targets children and that information failure is widespread. Alternatives to taxation include advertising bans, minimum unit pricing, regulation of sugar content and education campaigns.
Context 1: The market for sugary soft drinks
Extract A: In 2018 the UK introduced the Soft Drinks Industry Levy, a tax paid by manufacturers on drinks with more than 5 g of sugar per 100 ml (18p per litre) and a higher rate above 8 g (24p per litre). Sales of drinks liable for the levy fell from 2.20 billion litres in 2015 to 1.54 billion litres in 2019, while sales of low- and no-sugar drinks rose by over 30%.
Extract B: Many manufacturers cut the sugar content of their drinks before the levy started so they would not have to pay it. Critics argue that the levy is regressive and that people simply buy sugar from other foods instead. Supporters point to falling sugar intake among children and say that the revenue (about £300 million a year) funds school sport.
Extract C: Obesity costs the NHS an estimated £6.5 billion a year. Economists argue that consumers underestimate the long-term health costs of sugary drinks, that advertising targets children and that information failure is widespread. Alternatives to taxation include advertising bans, minimum unit pricing, regulation of sugar content and education campaigns.
12 marks
Using Extract A, calculate the percentage change in sales of drinks liable for the levy between 2015 and 2019.
24 marks
Explain how the data in Extract A suggest that drinks with and without sugar are substitutes.
39 marks
With the help of a diagram, explain how the Soft Drinks Industry Levy is likely to affect the market for sugary drinks.
425 marks
Using the extracts and your knowledge of economics, evaluate whether taxing sugary drinks is the best way to correct the market failure associated with them.
515 marks
Section B (essay)
Explain why firms in an oligopoly may decide to collude rather than compete.
625 marks
Section B (essay)
UK supermarkets often seek to merge. Evaluate whether competition authorities should prevent mergers between large firms in concentrated markets.
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Answer every question to finish (6 left), or finish when the time’s up.
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This paper is written by Plasmo in the style of the AQA A-Level Economics exam. It is not a past paper and is not produced or endorsed by the exam board.
AQA A-Level Economics Mock Exam: Paper 1: Markets and market failure | Plasmo