Alcohol is categorized as a demerit good. A demerit good can be defined as a product, such as cigarettes, which consumers may overvalue and tend to over consume but which the government believes may be harmful for consumers. Demerit goods are those goods whose negative externalities are very high.
First, to be able to analyse whether the government should impose substantially higher levels of taxation on the sale of alcohol, we must determine the effect the tax will have on the consumption of alcohol and the change in the revenue made by the government by increasing the tax on alcohol. …
