Alcopops Tax
Question 1
Some economists argue that one of the key political motivations for the introduction of the alcopops tax is to correct for the negative externalities which abusers of alcopops impose on society. Using diagram(s) discuss how a tax on alcopops can correct for negative externalities associated with excessive consumption of alcopops.
In a publication by University of Southern Queensland (2008), it defines that ‘excise taxes are taxes imposed on sellers of certain goods and services, and they are usually substantially higher tan sales tax on regular goods’. Moreover, ‘tax incidence is the share of a tax ultimately paid by consumers or by buyers’ (Layton, Robinson & Tucker 2005). It depends on both elasticities of demand and supply.
In economic, compulsory levy a higher tax for alcopops is a good way to correct for negative externalities associated with excessive consumption of alcopops. If the government imposed a $100 per 1,000 litres excise tax on suppliers of the alcopos over all price ranges, both suppliers and consumers share burden of tax. On account of the elasticity of demand for alcopops use is inelastic, consumers would bear full burden of tax.
This graph shows the effect of a negative externality. The curve for alcopops demand is D and the curve for alcopops supply is S1. The cost of alcopos is higher when tax get higher. The curve for alcopops after tax has becoming S2. Because of the tax, the demand of alcopops had been lower, we can know it by the new equilibrium point. After all, we can know how a tax on alcopops can correct for negative externalities associated with excessive consumption of alcopops.
Question 2
Do you expect the demand for alcopops to be elastic or inelastic? Why? How about the elasticity of supply of alcopops?
I expect the demand for alcopops to be elastic by the following 3 points. * The length of time involved
When the price of alcopops increase, the demand of alcopops will decrease rapidly. This
Some economists argue that one of the key political motivations for the introduction of the alcopops tax is to correct for the negative externalities which abusers of alcopops impose on society. Using diagram(s) discuss how a tax on alcopops can correct for negative externalities associated with excessive consumption of alcopops.
In a publication by University of Southern Queensland (2008), it defines that ‘excise taxes are taxes imposed on sellers of certain goods and services, and they are usually substantially higher tan sales tax on regular goods’. Moreover, ‘tax incidence is the share of a tax ultimately paid by consumers or by buyers’ (Layton, Robinson & Tucker 2005). It depends on both elasticities of demand and supply.
In economic, compulsory levy a higher tax for alcopops is a good way to correct for negative externalities associated with excessive consumption of alcopops. If the government imposed a $100 per 1,000 litres excise tax on suppliers of the alcopos over all price ranges, both suppliers and consumers share burden of tax. On account of the elasticity of demand for alcopops use is inelastic, consumers would bear full burden of tax.
This graph shows the effect of a negative externality. The curve for alcopops demand is D and the curve for alcopops supply is S1. The cost of alcopos is higher when tax get higher. The curve for alcopops after tax has becoming S2. Because of the tax, the demand of alcopops had been lower, we can know it by the new equilibrium point. After all, we can know how a tax on alcopops can correct for negative externalities associated with excessive consumption of alcopops.
Question 2
Do you expect the demand for alcopops to be elastic or inelastic? Why? How about the elasticity of supply of alcopops?
I expect the demand for alcopops to be elastic by the following 3 points. * The length of time involved
When the price of alcopops increase, the demand of alcopops will decrease rapidly. This
References: list Dr Rosanna Capolingua (2008) Youth Binge Drinking Culture Must End. [online]. Australia, AMA, Available from: http://www.ama.com.au/node/2965. [Accessed on 10th May 2010] China alcopops news paper (2008) Australia beer tax curbed binge drinking [online]. China, China alcopops news paper, Available from: http://www.hrbtax.gov.cn/web/mod/dsdt/show.php?mid=45&xtype=3845&id=182.[Accessed [Accessed on 10th May 2010] Teenage binge drinking effect[online]. Australia , Youth Central, Available from: http://translate.google.com.hk/translate?hl=zh-CN&sl=en&u=http://www.youthcentral.vic.gov.au/Health%2B%26%2BRelationships/Drugs,%2Bsmoking%2B%26%2Balcohol/Binge%2Bdrinking/&ei=hTHnS-S2A43Y7AOUu4T9BA&sa=X&oi=translate&ct=result&resnum=2&ved=0CCUQ7gEwATgK&prev=/search%3Fq%3Daustralia%2Byouth%2Bbinge%2Bdrinking%26start%3D10%26hl%3Dzh-CN%26safe%3Dstrict%26sa%3DN [Accessed on 10th May 2010] Youth Binge Drinking Culture Must End [online]. Australia, AMA, Available from: http://www.ama.com.au/node/2965. [Accessed on 10th May 2010]