Alcopops still flow despite tax rise
Summary
Alcopop sales have returned to double-digit growth, despite last year's 70 percent tax hike, amid signs the overall market for alcohol is growing, industry research obtained by The Weekend Australian shows. Alcopop tax had reduced teenage binge-drinking and that the Prime Minister seemed intent on tackling the big issues of opening hours, hard-hitting advertising and the price of alcohol. The people who worked in the Adelaide's hospitality industry said they had noticed a drop-off in sales of ready-to-drink alcopops. Claire Flood, 23, said she knew many people who would now buy a bottle of spirits and mix their own drinks instead of buying alcopops, "which i think is probably more dangerous than the standard drink... because it's not a standard measure".
Connections
One consideration is the responsiveness of the volume of a good consumed to a change in its price. In economic jargon, this is called "owned price elasticity". Demand for a good is said to be price "inelastic" if one per cent changed in its price results in a less than one per cent change in the quantity consumed. When demand is elastic, a rise in the tax rate increases government revenue even though consumption falls. Governments find a way to raise their revenue of tax systems by taxing some items more heavily than others. It can be efficient to tax most heavily those items that are comparatively price-inelastic.
Reflection
It is reasonable why a product with an elastic demand, in this case alcohol, has the objective of raising revenue for the government. With excise taxes imposed on alcohol, consumers will still continue buying them. I believe that the government should tighten on the tax act. They need to figure out other ways to decrease the consumptions of alcohol. Taxing is what we hate the most.
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