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The federal government taxes alcohol on a 100-proof basis. 100-proof is 50% pure ethyl alcohol. Most hard liquor is 80-proof (40%), wine is usually 24-proof and most beer 6-10 proof. How would alcohol consumption patterns be different if the government taxed alcohol on per liter basis rather than its proof (alcohol potency)?
Solution; Given,the federal government taxes alcohol on a 100-proof basis.This implies that consumers who consume a alcohol having higher proof, are taxed more. For example, people consuming drinks containing 50%pure ethyl alcohol come under 100-proof and are taxed more than the ones who consume hard liqour which is 80-proof. So, in this case, consumption of drinks…

ontaining50%lpure ethyl alcohol would decrease more than consumption of hard liquor ,wine and beer. Now if instead of 100-proof basis, government taxed alcohol on per litre basis, consumption of alcohol per litre of all the drinks would decrease.



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