Economics for Raising the Tax on Alcohol

Discuss about the Economics for Raising the Tax on Alcohol.

Raising the Tax on Alcohol Is the Most Effective Way to Reduce Alcohol Abuse in Society

It is well-known that, in current, alcohol abuse has become a major subject of concern to all over the world. People are taking help of alcohol to reduce stress, tension, and depression that is related their job, family, and daily life. In recent years, the alcohol consumption has been reached at a peak level. Along with this, alcohol consumption has been lead to alcohol abuse & addiction, mental & behavioral disorders, a number of diseases, and a variety of injuries (Reynolds, 2011). In addition, alcohol is considered as the 3rd primary risk factor that has been cause premature death and disability in the world.

As an economist adviser, I am agree with the statement of the  minister that raising the tax on alcohol is the most effective way to reduce alcohol abuse in our society. There are numerous reasons behind it. For case, the major reason is that the level of alcohol abuse depends on the pay of the consumers. If they are willing to pay high amount for alcohol then the demand as well as supply of alcohol will increase in an automatic manner. It is because of in this situation consumers want alcohol at any cost and this thing will increase the demand of the alcohol in the market. Along with, if there is high demand of alcohol then it will also boost up the supply of the alcohol (Voon, Mitchell & Liberman, 2014).

In this situation, raising the tax on alcohol would be helpful in order to decrease alcohol abuse in our society. It is because of increased tax will raise the alcohol prices automatically. An increase in alcohol price may be the most effective way to reduce the level of alcohol consumption. On the other hand, increased alcohol taxes are directly related with decreased overall consumption of alcohol as well as alcohol-related troubles. Along with this, higher alcohol prices would also be beneficial to decrease the adolescent drinking as well as consumption level of heavy drinkers. For example, a ten percentage raise in alcohol prices may bring about a 5-10% drop off in societal alcohol consumption (Doran, Byrnes, Cobiac, Vandenberg & Vos, 2013). For that reason; raising the tax on alcohol is a public health strategy that will be advantageous to decrease alcohol abuse in our society.

In addition to this, the increased alcohol price will decline the demand of the alcohol. And, a decrease in the demand will also lead a decline in the supply of the alcohol. The researchers say that, in Australia, a 10% excise/tax increase would be helpful in order to reduce alcohol consumption by 9.4%.  Apart from this, increased level of education and awareness are also the other effective ways to reduce alcohol abuse in our society (Elder, & et al., 2010). In this way, I am totally agreed with the statement that, raising the tax on alcohol is an effective and economical strategy that would be helpful in order to reduce excessive alcohol consumption as well as alcohol-related harms in a significant manner.

2. Difference between Comparative Advantage and Absolute Advantage

Absolute advantage and comparative advantage are two major concepts in the economy. These two concepts are far and wide used in international trade. Both concepts contend with production, goods and services. These both concepts have a major effect on the international trade. These terms also describe the ways that the nations may adopt and implement to utilize the available as well as limited resources to produce particular goods and products (Hubbard, Garnett, & Lewis, 2012). Along with this, comparative advantage is an important and precious factor that is helpful for the business organizations and they can improve their production activities and also can produce goods and service at a lower cost. Moreover, comparative advantage presents noteworthy economic development opportunities to the nations and also supports trade development among nations.

On the other hand, absolute advantage offers more innovative and effective ideas of production. It also plays a significant role in order to improve the capability and potential of the business organizations so they may use less resource than provided in order to produce goods and products in an effective and a more comprehensive manner (Hall, & Lieberman, 2012). Apart from this, there are numerous differences between absolute advantage and comparative advantage. For example, absolute advantage demonstrates the differences in productivity of nations, despite the fact comparative advantage discloses the differences in opportunity costs.  

In addition to this, absolute advantage offers an effective comparison of the productivity of different producers/economies. It is beneficial for the producer who is willing to use a small quality of inputs in order to produce goods and products. In opposed to this, comparative advantage enhances the ability of producer; so he/she can produce a particular product or service at a very low opportunity cost in comparison to another producer (Wang, & Carayannis, 2011). In other words, it also can be said that, comparative advantage motivates the countries to produce the products or services for which that have the lowest opportunity cost. Comparative advantage plays a significant role in order to increase the productivity of the nations in an effective and a significant manner.

On the other hand, comparative advantage is a situation where the trade is mutually beneficial for all the involved businesses or countries. In contrast, absolute advantage is not mutually beneficial for the producers of the products or services. Moreover, a nation will use an absolute advantage at what time it makes the highest number of goods by using the same as well as limited resources. . In opposite to this, a nation will use comparative advantage to take advantage of the lowest cost in order produce goods and services within a time frame (Baumol, & Blinder, 2010). In this way, it can be said that, both absolute advantage and comparative advantage are different terms that are used in the international trade and also take care of the production of goods and services.

References

Baumol, W. J., & Blinder, A. S. (2010). Macroeconomics: Principles and Policy. USA: Cengage Learning.

Doran, C. M., Byrnes, J. M., Cobiac, L. J., Vandenberg, B., & Vos, T. (2013). Estimated impacts of alternative Australian alcohol taxation structures on consumption, public health and government revenues. Med J Aust, 199(9), 619-622.

Elder, R. W., & et al. (2010). The effectiveness of tax policy interventions for reducing excessive alcohol consumption and related harms. American journal of preventive medicine, 38(2), 217-229.

Hall, R.E., & Lieberman, M. (2012). Microeconomics: Principles and Applications. USA: Cengage Learning.

Hubbard, G., Garnett, A., & Lewis, P. (2012). Essentials of Economics. Australia: Pearson Higher Education AU.

Reynolds, C. (2011). Public Health and Environment Law. Australia: Federation Press.

Voon, T., Mitchell, A., & Liberman, J. (2014). Regulating Tobacco, Alcohol and Unhealthy Foods: The Legal Issues. Australia: Routledge,

Wang, V.W.L., & Carayannis, E.G. (2011). Promoting Balanced Competitiveness Strategies of Firms in Developing Countries. Australia: Springer Science & Business Media.