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 fracture 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 harmful for consumers. Demerit goods are those goods whose negative externalities are real high-pitched. First, to be able to analyse whether the political sympathies should impose substantially high levels of levyation on the sale of alcoholic drink, we must determine the loading the tax will 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 plot shows the regard for alcohol is highly inelastic alcohol i.e. a change in the price of alcohol will terminus in a small change in the cadence demanded of alcohol. This is because a product like alcohol is addictive in nature. When a tax is imposed on alcoh ol, it leads to a jailbreak in the supply curve with supply decreasing from S1 to S2 and there is a considerable rise in price from p1 to p2. However, the switch in quantity demanded is relatively small with quantity demanded fall from q1 to q2.

When taxes are imposed on a good, suppliers can take up to pay the taxes or pass it on to the consumers in the determine 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 almost of the tax incidence falls on consumer s- the portion that is shaded from p1 to p2.! Suppliers to a fault 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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