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The Case:

In the mixed economic structure, government has to take care of the public by its policies to increase welfare of society. The welfare of people by providing daily usage items at lower rates becomes the first goal of government. Welfare economics helps the government in this regard as it is the study of how the allocation of economic resources affects the material well-being of consumers and producers. Perfectly competitive markets are most suitable markets to maximize the social welfare of the economy with addition of subsidies. Poor countries like Pakistan are not being able to maximize the social welfare as these countries are imposing high tax rates on the daily usage items like electricity, fuel, vegetables, milk, sugar etc. These high tax rates are affecting the consumers badly and living conditions are worsening up in Pakistan.

Requirements:

Being a student of economics, discuss the effect of this heavy taxation on the consumer surplus. Suggest the alternative polices to increase the revenue instead of high taxation policy on the basic necessities of life.

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