Evaluate the microeconomic impacts of a sugar tax

This is a possible essay question for a microeconomic exam. Let's first define what a tax is - an ad valorem tax is an indirect tax based on a percentage of the sales price of a good or service. We could also draw a diagram - an ad valorem tax will shift inwards supply, the lines will not be parallel as it is a percentage tax. The space between the two lines is the value of the tax. .
This should have both effects on the consumer and the producer. This increase in price of sugary drinks should reduce demand. The tax may decrease profits for the producer, as costs are higher. This should reduce the consumer and producer surplus. We could also draw a cost and revenue diagram, to show how the costs for firms has increased and the revenue has decreased. The cross elasticity of demand should mean consumers switch to healthier drinks. However, this depends on elasticities. The tax may not reduce demand if sugar drinks are demand price inelastic and consumers are willing to take an increase in price.
Finally, the tax may also have positive impacts on society such as reducing obesity - which can be shown through an externality diagram, as a tax should reduce demand and so mean that marginal public cost = marginal public benefit. The tax will raise money for the government which could be invested back into the public health care system.