Discuss economic arguments for and against imposing substantially :: Economics

Discuss economic arguments for and against imposing advantageously heightser taxes on sale of intoxicant.Governments interfere in markets and their working with the specialpurpose of provision of welf ar to people and preventing marketfailure.There ar many methods of intervention such as- taxes and subsidies- buffer stocks- applying maximum and minimum impairments- provision of public goods and services- provision of education and training- rule and market reformsApplying taxes has two purposes to generate revenue for the authorities and to discourage outgo and output of certain goods,usually demerit goods.Demerit goods are those goods that are usually over consumed by in amarket system, and take away social costs exceeding social benefit due tohigh invalidating externalities. They contrast merit goods which aredesirable for the welfare of society, as positively charged externalities exceednegative externalities.Taxes out on goods such as alcoholic drinkic beverage are c onsidered indirect taxes.Depending upon the price elasticity of a good, and its lead andmarket price, government places either- special(prenominal) taxes that are of a specific number, e.g. 10 dirhams on every bottle of beer- ad valorem taxes that add a percentage of the market price onto taxes e.g. 5% of price of beerA government must analyze the effects of taxing, or increasingtaxation on a good, whether or not the taxation satisfies the goals.The Social costs of alcohol involve the cost of production, cost ofpurchase and negative externalities such as alcohol poisoning anddrunken driving deaths and violence.The social benefits are the avail made by producers, the utilitygained by consumers and externalities such as bar of heartdiseases.The imposing of easily higher taxes on the sale of alcohol maybe good in two waysFirstly, alcohol is regarded as a habit forming good. Hence it may be sour that either it disobeys the law of demand (quantity demandedof a good is inversely pr oportional to change in price, all otherfactors remaining constant), or it is price inelastic (a percentagechange in price causes a littler percentage change in quantitydemanded). Although imposition of taxes will adjoin 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 stomachs utility and satisfaction to consumers. Itspositive externalities include reducing coronary diseases, andproviding amusement to others in social events. However, its negativeexternalities include 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