IB Economics- Commentary Planning Sheet

Syllabus Section Negative externality of consumption

Title of Article: Dubai scraps 30% tax on alcohol sales amid economic rebound

Source: REUTERS
Link: https://www.reuters.com/world/middle-east/dubai-scraps-30-tax-alcohol-
sales-amid-economic-rebound-2023-01-02/
Country: UNITED ARAB EMIRATES (UAE)
Date of article: January 2, 2023
Date of access January 16, 2023
to website or
source

The overall aim is to use your economics knowledge to explain an event or issue in the world around
us. Your evaluation question should be specific to your article, but a good evaluation question
usually touches on one of these themes:

● Did the person make a good decision?

● What predictions can you make?
● What is the impact on different stakeholders?
● Can you consider another point of view?
● What are the pros and cons of this issue?
● What are the short and long-term implications?
● Weigh the costs and benefits of an action or policy.

Structure: Use the first paragraph to introduce the economic theory and possibly define key terms.
Use the other paragraphs to show how the theory helps you understand the article. Make reference
to the labels in your diagram. In 3rd – 4th paragraphs answer your evaluation question. Weigh
alternative points of view.

Which economic theory is relevant to the discussion of the article?

ABOUT THE NEGATIVE EXTERNALITIES ON CONSUMPTION

Important terms in the article or related to the

article that would require definition:
AFFECTS, SPILL OVER, CONSUMPTION,
ELASTICITY, REVENUE, ALCOHOL, TAXES,

What issue is discussed in the article? What is the KEY CONCEPT? How do you connect with the
concept
In the article they discussed about the taxes suspended 30% on alcohol and this dropped the
license fee to the sellers and they said this moves tourism in the country more and more. As
mentioned below, the GDP grew 4.6% in the year after the pandemic by tourism.My key concept
is economic well-being. To promote tourism Dubai scraps 30% tax on alcohol and with economic
well-being I will connect negative externalities of consumption as alcohol is an inelastic product
there won’t be much effect on the quantity demanded.

Diagram to illustrate a problem Diagram to show the suggested policy solution

1. Taxes.
Negative externalities of consumption 2. Subsidies for the firms not to produce.
3. awareness campaigns.

Now, evaluate this issue. If there is a policy solution, is it likely to solve the problem? What are
the likely effects, both positive and negative, in the short and the long run, on various
stakeholders? If you can, rank the impacts from biggest to least, with reasons. Lastly, for the best
sort of evaluation, how does this instance reflect on economic theory itself? Does what happened
or what is suggested in your news article accord with what economic theory suggests should
happen? If not, why not?
The negative aspects are the product is inelastic in nature and there won’t be a significant
change in the quantity demanded, inelastic consumers will stick to the product because there are
very few substitutes for the alcohol. The officials consume more time to implement the policy and
the corruption.

The positive aspects are that by taxation the government generates revenue, new campaigns are
going to be made and will be done efficiently, elastic consumers move to cheaper and safer ones.
The government can give subsidies for producers not to produce alcohol because of the
consumption more number of units that leads to spill over costs on the society which shown in
the graph.