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 break good can be defined as a product, such as cig bettes, which consumers may everyplacevalue and tend to over consume but which the organisation believes may be hurtful for consumers. Demerit goods are those goods whose negative externalities are real spicy. First, to be able to analyse whether the regime should impose substantially high levels of levyation on the sale of inebriantic drink, we must determine the freightage the tax forget shit on the consumption of alcohol and the alternate in the revenue made by the government by increasing the tax on alcohol. The following diagram illustrates the effect of additional taxes on alcohol:- As the diagram shows the regard for alcohol is highly inelastic alcohol i.e. a change in the price of alcohol will forget in a small change in the meter demanded of alcohol. This is because a product like alcohol is addictive in nature. When a tax is imposed on alcohol, it leads t o a slipperiness in the supply curve with supply decreasing from S1 to S2 and on that point is a considerable rise in price from p1 to p2. However, the release in quantity demanded is relatively small with quantity demanded move from q1 to q2.

When taxes are imposed on a good, suppliers can deal to pay the taxes or pass it on to the consumers in the wreak 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 intimately of the tax incidence falls on consumers- th e portion that is shaded from p1 to p2. Supp! liers overly 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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