Which of the following best explains why the government puts

Which of the following best explains why the government puts excise taxes on alcohol and tobacco but not on Coca-Cola, beef or butter?

Any amount of consumption of alcohol or tobacco is worse than any amount of consumption of butter, beef or Coca-Cola.

The government wants to take care of us by taxing things that are bad for us.

Taxing highly inelastic goods allows the government to raise substantial revenues without causing excessive loss of sales to suppliers. Putting a tax on elastic goods with readily available substitutes would cost those suppliers a great deal of revenue without raising a sufficient amount of tax revenue to justify the loss to producers.

Butter, beef and Coca-Cola have no bad health effects.

Solution

Taxing highly inelastic goods allows the government to raise substantial revenues without causing excessive loss of sales to suppliers. Putting a tax on elastic goods with readily available substitutes would cost those suppliers a great deal of revenue without raising a sufficient amount of tax revenue to justify the loss to producers.

The commodities having low elasticity means that any percentage change in price will have least(inelastic demand) effect on the demand for that commodity, in our case tobacco. Tobacco or alcohol, both the products are considered as lexicographic preferences, means that these products are habitual and will be consumed whatever the price is. So any amount of tax on these commodities will not only increase the revenue for the government but also will not affect the sales unlike the commodities having higher elasticity of demand with many substitutes available in the market.