The Market for Alcoholic Beverages, Questions and Answers

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2 Questions to address: a) What do we know about the demand for alcohol, and how is this relevant to policy makers wishing to curb consumption? b) What can you determine about the supply of alcoholic beverages (in terms of industry structure)? How might individual firms hope to get ahead in this market? c) Explain, using diagrams, how individual producers in this industry might be affected by the price floor implemented in Scotland. What determines the extent to which they are affected? d) Why do you think the policy makers have opted for a price floor over a tax? The Market for Alcoholic Beverages It is stated in The Economist print edition (2013) that according to World Health Organization, “the global consumption of alcohol has been stable since 1990”. However, across the world, small part of population consume a larger amount of alcoholic beverages (Alcohol pricing: We wish 2013). Even though the large-drinkers population is smaller than normal-drinkers or non-drinkers population, they do so in a more harmful and hazardous way (Alcohol pricing: Mulled Whines 2013). Alcohol consumption will not only affects drinkers but it also has social and economics implications. For instance, in many countries, government will cover the medical costs of the people in their country. So as a result, government will need to spend money on drinkers when heavy drinkers harm themselves or other people (World Health Organization 2011). Other than that WHO (2011) also mentioned that there are economic costs related to law enforcement and other costs. Demand of alcohol follow the law of demand, that is “holding everything else constant, when the price of a product falls the quantity demanded of the product will increase, and when the price of a prod... ... middle of paper ... ...e to reduce alcohol consumption. As an article in December 2013 The Economist stated “just as bans on indoor smoking spread rapidly from country to country, the Scottish decision on the price of booze could raise drink prices all over the world. A sobering thought in the festive season”. 7 Reference List Hubbard, G, Garnett, A, Lewis, P & O‟Brien, T 2012, Microeconomics, 2nd edn, Pearson, Sydney The Economist 2013, „Alcohol pricing: Mulled Whines‟, The Economist 21st December. Available from: . The Economist 2013, „Alcohol pricing: We wish you a merry(ish) Christmas‟, The Economist 21st December. Available from: lives-and-money-scotland-right-try-it-we-wish-you>. [8 May 2014]. World Health Organization 2011, Global status report on alcohol and health, WHO, Switzerland.

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