Discuss the economic arguments for and against imposing substantially higher levels of taxation on the sale of alcohol.

Alcohol is categorized as a faulting good. A fault good can be defined as a product, such as cig bettes, which consumers may everywherevalue and tend to over consume but which the organisation believes may be baneful for consumers. Demerit goods are those goods whose negative externalities are real amply. First, to be able to analyse whether the regimen should impose substantially high levels of levyation on the sale of alcoholic beverageic drink, we must determine the burden the tax go out shit on the consumption of alcohol and the alternate in the revenue made by the government by increasing the tax on alcohol. The following plat illustrates the effect of additional taxes on alcohol:- As the plat shows the regard for alcohol is highly inelastic alcohol i.e. a change in the price of alcohol will expiry in a small change in the mensuration demanded of alcohol. This is because a product like alcohol is addictive in nature. When a tax is imposed on alcohol, it lead s to a remove in the supply curve with supply decreasing from S1 to S2 and at that place is a considerable rise in price from p1 to p2. However, the settle in quantity demanded is relatively small with quantity demanded travel from q1 to q2.

When taxes are imposed on a good, suppliers can pick to pay the taxes or pass it on to the consumers in the melody of a price hike. They usually make this decision establish on the elasticity of the demand. If the demand is inelastic, then the tax will be passed on to the consumers. As the diagram clearly illustrates just about of the tax incidence falls on consumers- the portion that is shaded from p1 to p2. Suppl! iers similarly have to pay some of the tax but it is a very small part of... If you want to get a enough essay, order it on our website: OrderCustomPaper.com

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