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Arguments for / against higher levels of taxation on the sale of alcohol.…
Arguments for / against higher levels of taxation on the sale of alcohol. (15) By Ethan and Svend
Positives
Decreases demand for alcohol
demerit goods
removes some of negative externalities
Inelastic
High gvmt revenues
Negatives
Decreased consumer spending
Decreased need for workers
Alcohol consumers
could turn to other illegal drugs
loss of tax revenue
negative externalities
Definitions
Taxation
Means of financing gvmt expenditure and encouraging/discouraging ppl to buy particular goods
demerit goods
good who's consumption is seen as socially undesirable due to effect on consumer
Negative externalities
Cost suffered by a third party as a result of an economic transaction
PED
Measure of the relationship between a change in the quantity demanded of a particular good and a change in its price
Price inelastic
A large change in price will result in a smaller change in demand
CLASPP
Stakeholders
Alcohol producers
Bars/Pubs
Alcohol consumers
Government
Long term/Short term
Short term
Alcohol industry workers losing jobs
Decreased consumption
Some people likely to just pay tax as demand inelastic
Long term
decreased demand for alcohol
Assumptions
Ceteris Paribus
Pros/Cons
see POS/NEG below
Conclusions
Tax is likely to have little effect on demand
Tax will create large revenues
Real life examples
job loss due to tax
less jobs in bars and pubs
brewers lose out on income
higher gvmt revenue
more funding for education
programs on the dangers of alcohol
Alcohol consumers
Diagrams
Inelastic demand diagram
Correcting negative externalities
