The Principles of Economics

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Running Head: PRINCIPLES OF ECONOMICS Alcohol abuse: A costly lifestyle Economic analysis states that alcohol abuse is a costly lifestyle. Alcohol consumption is approximated to cost individuals and the society billions of money indirectly or directly. The expenditures can be sub-divided down to include those costs that are added directly to the purchasing of alcohol and those which are incurred as a result of alcohol related health problems like liver cirrhosis (Coate, 2001). Reducing alcohol abuse There have been debates and discussions on whether to increase taxation on all alcohol related products in order to reduce alcohol consumption. Questions have been raised on the level at which the taxes should be increased and whether the process of raising these taxes is effective in curbing the alcohol menace. One standard is that the tax revenues must be sufficient enough to pay the external costs of alcohol use, that is, the costs that are not caused by the drinker. According to this standard, it is very inappropriate for the tax rate to take into account that drinkers are at heightened dangers of injury, since they already pay that cost and presumably take it into account in coming up with their consumption decisions. In addition also, to the extent that drinkers cause others into danger of injury (an "external" cost), that must be reflected in the tax rate, for two or more reasons (Chaloupka 2009). The supply and demand regulations are the building principles in every

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