Question

Governments often impose taxes on the consumption of goods deemed "undesirable". For example, taxes are imposed on purchases of alcoholic beverages and tobacco products. But rarely do governments impose restrictions on the quantity of such goods that consumer may purchase during a given period of time. For other goods, the government instead mandates the maximum quantity that can be consumed. For example, limiting the quantity of fish that can be caught per year instead of charging fishermen a tax on the number of fish they catch per year. Why do you think that in some cases a tax is used while in other cases a quantity limit is used?

Answer 1

Irrespective of the fact that whether it is tax or quantity limit, the government aims at decreasing the consumption, however it has to be observed that when the government feels that if there will be reduce in consumption with the increase in price, then the tax is imposed. On the other hand, if the government believes that increase in price might not alter the consumption by much and excess of it might damage the society, then the government propels a quantity limit.