Contents

• N/A

Description

This assignment provides answers to the following questions –
1) Using a graph, show how a tax affects an initially unregulated market equilibrium for
alcoholic drinks. Then, using welfare analysis, identify the differences in consumer
surplus, producer surplus, deadweight loss and government revenue before and after the
tax.
2) How does the slope of the demand and supply curves determine the effect of an increase
in taxes on subsequent alcohol consumption? Who is more likely to change their behavior
as a result of an increase in alcohol tax: the consumer or producer? Why?
3) According to the article, what is the primary purpose of the proposed changes to alcohol
taxation? Do you think it will be effective? Are there better alternatives to a tax?
4) Draw a graph depicting a single firm in the market for alcoholic drinks, assuming the
market is perfectly competitive.
5) Using a graph, introduce a tax on alcoholic drinks in the market. How does this affect the
individual firm, and the rest of the perfectly competitive market? Differentiate between
the long and short-run.
6) How does your answer in (2) change if the market was a monopoly instead? Show this on
a graph and explain.