The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables than most Europeans and more food types that may be considered to be demerit goods. In 2017, the Hungarian government introduced a tax on unhealthy food, known as the chips tax. The tax has had some success in moving demand to healthier foods. Some economists suggest that governments should use price controls as well as taxes to influence the food market.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [2] A product which is more harmful to consumers than they realise / the government considers is more harmful
2. [1] It is over-consumed / overproduced
3. [1] it creates external costs
4. [1] A product that is harmful
5. [1] An extension in demand is caused by a change in the price of the product
6. [1] rise in quantity demanded
7. [1] it is shown by a movement along the demand curve
8. [1] An increase in demand is caused by a change in an influence on demand other than a change in the price of the product / means more is demanded at each and every price
9. [1] example of a cause of an increase in demand e.g. rise in incomes
10. [1] it is shown by a shift in the demand curve
11. [1] Income is likely to become less evenly distributed
12. [1] indirect taxes are usually regressive
13. [1] taking a larger percentage of income of the poor
14. [1] Tax revenue likely to rise
15. [1] will rise more on goods with inelastic demand e.g. food
16. [1] may fall if demand falls significantly
17. [1] If any extra tax revenue is spent on lower income groups e.g. welfare benefits
18. [1] the effect on income distribution is less certain / income may be more evenly distributed
19. [1] Tax evasion and avoidance is less common in the case of indirect taxes
20. [1] though there may be informal markets
21. [1] may influence price and quantity purchased
22. [1] if set below the equilibrium level, will reduce price
23. [1] some people will be able to purchase food at a lower price
24. [1] may reduce poverty – food is a basic necessity
25. [1] may stop monopoly food producers setting high prices
26. [1] if set above the equilibrium, it will have no effect
27. [1] it set below the equilibrium, will result in shortages
28. [1] some additional measure will have to be introduced to ration out food
29. [1] some foods may be harmful to health and their consumption should be discouraged
30. [1] may result in firms making losses and so reducing quality of food or employment of workers
31. [1] free market forces may result in a more efficient allocation of resources