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Discuss economic arguments for and against imposing substantially higher taxes on sale of alcohol Governments interfere in markets and their working with the primary purpose of provision of welfare to people and preventing market failure. There are many 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 reforms Applying taxes has two purposes: to generate revenue for the government and to discourage consumption and output of certain goods, usually demerit goods. Demerit goods are those goods that are usually over consumed by in a market system, and have social costs exceeding social benefit due to high negative externalities. They contrast merit goods which are desirable for the welfare of society, as positive externalities exceed negative externalities. Taxes out on goods such as alcohol are considered indirect taxes. Depending upon the price elasticity of a...

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