Business leaders in a small but thriving community in the southeast have noticed a considerable increase in the alcohol consumption of their workers. This increase, they claim, reduces worker productivity, increases absenteeism and jeopardizes safety on the job. Rather unconvincingly, workers argue that no one drinks more than about a six-pack of beer per day, and this certainly could not cause all the problems management says it does. In an effort to curb drinking excesses, the business leaders are lobbying the state congress to increase the tax on potable alcohol.
Suppose the following utility function describes "tastes" for alcoholic beverages and all other goods of the average person at which desired tax policy is aimed:
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