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 demerit good can be defined as a product, such as cig bettes, which consumers may overvalue and tend to over consume but which the organisation believes may be evil for consumers. Demerit goods are those goods whose negative externalities are real risque. First, to be able to analyse whether the establishment should impose substantially high levels of levyation on the sale of alcoholic beverageic drink, we must determine the laden the tax allow shit on the consumption of alcohol and the alternate in the revenue made by the government by increasing the tax on alcohol. The following plot 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 termination in a small change in the measuring rod 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 solecism in the supply curve with supply decreasing from S1 to S2 and in that respect is a considerable rise in price from p1 to p2. However, the dispatch in quantity demanded is relatively small with quantity demanded locomote from q1 to q2. When taxes are imposed on a good, suppliers can conduct to pay the taxes or pass it on to the consumers in the spurt of a price hike. They usually make this decision found 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 nearly of the tax incidence falls on consumers- the portion that is shaded from p1 to p2. Suppliers 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

If you want to get a full essay, visit our page: writ! e my paper