Obesity is a global problem and many countries such as Australia are suffering because of the obesity epidemic. In many contexts, it is in fact rising faster and as such the related health effects are also costing the exchequer . Mass production of processed food has resulted in the costs of food becoming relatively cheaper. These processed foods are sugary and are high in fat. Studies show that as many as 30,000 people might die every year because of obesity related conditions. In Australia as in other countries, the government and the taxpayer is left supporting the situation. Obesity is hence a market failure that has been pushed into context because of over production or mass production.
Now obesity as a market failure situation is pushed into context because of the sales of sugary products which can hence be considered as the cause for the negative externality. Although someone produces the sugary food and someone else consumes it, there is a cost to the society. The decision based impact to society is not paid for by the persons making the decisions to sell and buy here. The cost to society exists because the impact of the good to society is more than what the person buying it pays. In such a market only marginal cost and marginal benefit are considered but not the cost of externality. This results in market inefficiencies and which addressed results in market failure. The manufacturer of the sugary product does not take control of the product’s costs of externality.