A minimum unit price (MUP) on alcoholic drinks was introduced in Scotland in 2012 and in Wales in 2020. A sugar tax was introduced in the UK in 2018. Taxation is widely used by governments to reduce the smoking of tobacco products. All of these are examples of government intervention on markets to reduce consumption of goods which are considered “socially harmful”. Discuss first how these policies affect consumption, consumer surplus, producer surplus and total market surplus. Discuss then the motivations and the legitimacy for governments to intervene on these markets, and any alternative (or complementary) measure governments may adopt to pursue their goals.
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