Alcohol Taxation Essay

Submitted By MehndiG
Words: 763
Pages: 4

“Alcohol, the cause of and solution to all the world’s problems.” -H.J. Simpson
Human Representative Studies discovered that 46% people drink liquor. Over the past 30 years, UK has seen a vivid rise in the alcohol consumption and alcohol-related harm. (Kenkel, 1996) has used drinks per day as the key measure of alcohol consumption. The most often used mechanism to inhibit consumption has been taxation. “Sin Taxes” popularly known as “Excise duties” are taxes on alcohol, tobacco products and oils. Therefore, if the price of the alcohol increases, the consumption of alcohol fluctuates. The economic measure of this degree of association between quantity and price is referred to as price elasticity. It measures the rate of response of quantity demanded due to a price change. The formula for the Price Elasticity of Demand (PEoD) is:
PEoD = (% Change in Quantity Demanded)/(% Change in Price) Goods to which a person becomes accustomed or habitual to always have an inelastic demand. For example., alcohol, tobacco &c cigarette. It is so, because one cannot do without them. In this essay, we will come across shifts in demand and supply curves and effect of minimum price. It is necessary to understand the shift in curves due to increase and decrease in price of alcohol. 1) Increase In Price Following diagram will show the change in demand of alcohol with increase in price.

This Figure 1 shows that the actual price of the alcohol was two pounds. With the increase in tax on alcohol, the supply curve shifts to the left ( S0 to S1). We can see that with the increase in price, the demand for alcohol decreases. The area ABC stands for deadweight loss due to taxation. So the demand for alcoholic beverages changes for people with low income. This group then shifts to drugs, smoking and red bull. But it has a little effect on people with high income.

2) Decrease In Price

This theory says that with the decrease in price, demand for alcohol increases. Thus, the consumption of alcohol will be more.

Figure 2. Shows shift of supply curve (S to S1) with the decrease in price. As price falls from P to P1, the demand for alcohol increases from Q to Q1. Hence, people drink more and face horrible consequences that include fatal and nonfatal motor vehicle crashes and other injuries, liver cirrhosis mortality and other health consequences, and violence and other crime.
Not only this, alcohol-related hospitals have doubled in England, deaths from alcoholic liver disease are increasing. Affordability of alcohol has increased producing greater level of harm.
To control alcohol-related harm and consequences faced by the problem drinkers. NHS Scotland’s legislation has passed for alcohol minimum pricing. It is a policy where a minimum price is set for a unit of alcohol, below which it cannot be sold. Not only an individual but the whole society suffers the damage of the alcohol. There are costs that are related to…