Tian & Liu (2011) discuss taxes on alcoholic beverages. Discuss the economic rationale for government intervention in the market for alcoholic drinks. If externalities are part of the reason, clearly state whether they are positive or negative and whether they originate from the consumption or the production side. Illustrate the potential impact of an excise tax levied on the producers of alcoholic drinks. Evaluate the impact on consumers of such a tax and discuss if it is a progressive tax. Contrast how your answers to the previous questions would change across countries with different price elasticities of demand for alcoholic drinks.
