Discuss how effective a policy of imposing a tax on polystyrene containers would be in reducing the negative externalities arising from litter on the beach? (18 marks)
Indirect taxation is when the government imposes a tax were you don’t have to pay it as you can avoid buying the good, if it has a tax on it, for example I can avoid paying an indirect tax such as duty, by not buying cigarettes or petrol. Furthermore in this case an indirect tax would be on the polystyrene containers this would lead to many problems such as low demand for the food, for example there may be a small decrease in the amount of total sales for the business however, because the polystyrene containers are very inelastic because you need them to hold the hot food in it won’t have that much of a decrease as shown in the graph below. In addition because the quantity will decrease slightly this will affect the number of negative externalities so this will also mean that it will work however it won’t work to a large extent this may be because of the inelasticity of the containers. In the long run it may reduce the sales of the product however it will not solve the problem.
Furthermore you could argue that it will not solve the problem, this is because people may swap to paper bags instead of polystyrene containers, and this is because it is a good alternative furthermore it does not solve the problem as people will try and avoid using the polystyrene containers and will find other methods and the beach
