Discuss economic arguments for and against imposing substantially :: Economics

Discuss economic arguments for and against imposing substantiallyhigher(prenominal) taxes on sale of intoxicantic drink.Governments interfere in merchandiseplaces and their working with the primary calculate of preparation of welfare to people and preventing marketfailure.There are galore(postnominal) methods of intervention such as- taxes and subsidies- buffer stocks- applying maximum and minimum prices- provision of public goods and services- provision of education and training- legislation and market reformsApplying taxes has two purposes to generate revenue for thegovernment and to discourage consumption and widening of certain goods,normally demerit goods.Demerit goods are those goods that are usually over consumed by in amarket system, and have brotherly costs exceeding social benefit due tohigh veto externalities. They contrast merit goods which aredesirable for the welfare of society, as incontrovertible externalities exceednegative externalities.Taxes out on goods such as alcohol are considered indirect taxes.Depending upon the price elasticity of a good, and its demand andmarket price, government places either- specific taxes that are of a specific number, e.g. 10 dirhams on every bottle of beer- ad valorem taxes that add a character of the market price onto taxes e.g. 5% of price of beerA government moldiness analyze the effects of taxing, or increasingtaxation on a good, whether or not the taxation satisfies the goals.The Social costs of alcohol incriminate the cost of production, cost ofpurchase and negative externalities such as alcohol poisoning anddrunken driving deaths and violence.The social benefits are the profit do by producers, the utilitygained by consumers and externalities such as prevention of nervediseases.The imposing of substantially higher taxes on the sale of alcohol whitethornbe good in two waysFirstly, alcohol is regarded as a habit forming good. Hence it may beassumed that either it disobeys the law of demand ( quantity demandedof a good is inversely proportional to turn in price, all otherfactors remaining constant), or it is price inelastic (a sharechange in price causes a smaller percentage change in quantitydemanded). Although imposition of taxes will increase the market priceof alcohol, the change in demand would be substantially lower. therefore the government would gain revenue, which it may use forprovision of welfare.Secondly, alcohol is a demerit good. It has private benefits as anindustry, and it provides utility and satisfaction to consumers. Itspositive externalities take on reducing coronary diseases, andproviding amusement to others in social events. However, its negativeexternalities intromit addiction, drunken driving accidents and fightswhich result in property damage, and provide a burden to society. Itspositive externality of preventing coronary diseases arises only from