Context for question 1
Section A
Answer all parts of Question 1.
Source material: The market for fast food
‘Fast food’ is a term often used by the media to refer to a large range of highly processed foods, many of which are low in nutrients but high in sugar, salt and saturated fats. According to a recent study, eating fast food is increasing death rates faster than smoking. Medical experts are concerned that fast food has become a regular part of the diets of millions of people worldwide.
It is estimated that sales in the United States (US) of one of the world’s largest fast food outlets rose by 22% between 2019 and 2023. This was despite a 19% increase in its prices. The increase in sales can be partially explained by a rise in disposable income in the US of 29% over the same period. People described as ‘cash rich but time poor’ tend to choose fast food as it is convenient, affordable and satisfies their hunger.
The wider impact of fast food on the economy is often overlooked. In 2016, more than 1.9 billion adults were overweight. Worldwide, the cost of treating diseases related to being overweight, such as heart disease and diabetes, was estimated to be US$2 trillion. When individuals experience poor health, they may need to take medical leave or reduce their working hours. This leads to a loss of income for the affected individuals and a loss of sales and reduced productivity for their employers.
Many economists would refer to fast food as a demerit good. It is not surprising therefore that governments have intervened in fast food markets to tackle the over-consumption of these products. Selecting the best way to intervene, however, remains a cause of debate. In 2011, Denmark was the first country to introduce a tax on fast food but was forced to reverse the policy within one year due to the resultant job losses from increased food prices. Colombia introduced a new indirect tax on fast food in 2023 which began at 10% before rising to 15% in 2024 and then 20% in 2025. Despite being welcomed by campaigners and health experts who say it sets an example for other countries, concerns remain about the impact of such a policy on an economy’s overall macroeconomic performance. For example, in the US where approximately 5 million people are employed in fast food outlets, there could be a considerable increase in unemployment.
Sources: adapted from; Obesity and overweight, who.com, 1 March 2024
Denmark scraps its infamous fat tax after only one year, euroactiv.com, 14 November 2012
‘Tremendously unfair’: Latin America’s strictest junk food law divides shoppers in Bogotá, The Guardian, 29 December 2023