ECON 1101 - The Market for Alcoholic Beverages An important purpose of this study has been to search for differences in economic factors, prices and incomes to explain the differences in the consumption of alcoholic beverages. The effects of the prices and incomes on consumption are measured by elasticity’s, which include price elasticity. Price elasticity of demand is a measure used in economics to show the elasticity of the quantity demanded of a good compared to a change in its price, ceteris paribus. Overall, alcohol is measured to have relatively inelastic demand of around 0.5 (-0.5), according to various studies. This means that even though a price increase will decrease overall sales, it will increase the total revenue gained from the market. However, when government-set taxes are the means of increasing the price of a unit of alcohol, both consumers and producers suffer a burden, as shown in the diagram below. Assuming the demand remains unaffected in the diagram above, it can be seen that the supply curve shifts to the left from ‘S’ to ‘S + Tax’. Because alcohol is an inelastic good, the demand curve would be fairly vertical. The price rises from p1 to p2, and this creates a new equilibrium at p2, q2. As this happens, there is a consumer burden in p1 and p2; and a producer burden in p1 and p3. The consumer burden is much larger that the producer burden because the consumers have to buy the good (which may even be due to addiction) and so they will pay whatever the price is, while the producers don’t have to worry about losing too many consumers. The consumer and producer burden added together is equal to government revenue, and the rest shown is the ‘deadweight loss to society’. In Australia, excise, customs... ... middle of paper ... ...oor the producer surplus is equal B + F + G, while the consumer surplus is just area A. Contrast this to the tax. Whilst the price still increases, it is the government that gains revenue from the tax, equal to B + F, whilst the consumer surplus is still area A, the producer surplus is now just area G, and B + F goes to the government as tax revenue. From an economic view, both change behaviour, and assuming that there are negative externalities associated with excessive alcohol use, neither incurs a deadweight loss. Thus, total surplus is the same under both scenarios (A + B + D + F). Overall, policy makers have opted for a price floor over tax. While both aren’t truly economically effect, a price floor is more suitable to address the real social costs associated with binge drinking. Bibliography: made by Gallet (2007) and Wagenaar, Salois and Komro (2009).
While most people can control their liquor, unfortunately others can’t. Legalizing alcohol was a big mistake, the many different tragedies that occurs because of alcohol is insane. The fact that imbeciles are allowed to drink is even worse. In the article “The Legalization of Drugs” by Douglas Husak and Peter de Marneffe, both philosophers have a debate as to whether to criminalize drug users or not. Husak argues for legalization of drugs. While Marneffe argues against the legalization of drugs. The article states “Since alcohol is currently legal, and this condition is not likely to change soon. It is necessary to defend the prohibition of any drug against the background of legalized alcohol. Observe, then, that an increase in the use of some drugs as a result of legalization might actually result in a net decrease in the independent harms of drug and alcohol abuse taken together” (Husak 112). Being that alcohol is currently legal, there’s a 99.9% chance that it won’t change soon. Some drugs are banned, but, alcohol is still being sold in stores. Marijuana is a nonviolent drug, whereas alcohol promotes anger and pure violence. By legalizing marijuana and making drinking alcohol illegal, there’s a chance that violence will decrease. The video “Why We Need to End the War on Drugs” spoken by Ethan Nadelmann, he discussed both valid points about drugs and whether it should be legalized or stay
Fang, H., French, M. T., &McCollister, K. E. (2010). The cost of crime to society: New crime-specific estimates for policy and program evaluation. Drug alcohol dependence 108(1-2), 98-109. doi:10.1016/j.drugalcdep.2009.12.002
In the contents of this paper, four points of view will be discussed on an extremely controversial issue that has an effect on a large percentage of citizens in the United States. The issue at hand is whether the legal age to consume alcohol should be lowered from 21 to 18, and will state a pro and con side, as well as 2 stakeholders for each side of the argument. The stakeholders on the pro side are as follows: Underage consumers of alcohol, businesses that sell and the companies that produce alcohol. The people on the con side of the argument that would want the legal age to remain at 21 include State and Federal Law Enforcement Agencies, as well as the demographic of Parents that would prefer to keep their children from being exposed to alcohol at a potentially young age. As you continue to read the stakeholders opinions and arguments will be explained, after which the author’s personal opinion will be advanced. After doing my own in depth research on the topic, the legal age to consume alcohol should remain at 21 as set by the United States Congress when they passed the National Minimum Drinking Age Act (NMDAA) in July of 1984. This act punished every state that allowed persons below 21 years of age to purchase and publicly possess alcoholic beverages by reducing its annual federal highway apportionment by ten percent. (National Minimum Drinking Age Act) This caused all fifty continental U.S. states to set their legal drinking age to 21, and it has remained there for thirty years.
Muhlenfeld, Elisabeth. “Seeking a Drinking Age Debate.” University Business 11.10 (2008): 53-4. Academic Search Premier. Web. 3 Mar. 2010.
STATISTICS: The abuse of alcohol alone is estimated at $144.1 billion dollars annually. Every man, woman and child in America pays nearly $1,000 a year to cover the costs of unnecessary health care, auto accidents, crime and lost of productivity resulting from alcohol abuse. Alcohol deaths account for approximately five percent of all deaths occurring in the United States. Alcohol is considered to be one of the most widely used drugs as it attacks the central nervous system. Two-thirds of all adults drink alcohol; one-third of those are under the age of eighteen.
The demand for alcoholic beverages as a whole is inelastic which can be proved from the price elasticity of demand formula. The price elasticity of demand is explained by Hubbard et al. (2012) as ‘the responsiveness of the quantity demanded to a change in price’ and can be calculated from the following formula: Price elasticity of demand = Percentage change in quantity demanded/percentage change in price. From the statistics given by The Economist et al. (2013) of how a 10% price rise in prices would decrease consumption by around 5%, the equation would be: Price elasticity of demand = -5%/10% which means the price elasticity of demand would equal -0.5. Due to the fact demand ...
The governments of the United States and many other countries have chosen to regulate addictive substances, like cigarettes, via taxation; minimum-age purchase laws; restrictions on consumption in schools, the workplace, and public places; and stiff fines for driving under the influence of alcohol. The prices of these substances will rise because of taxation; other forms of regulation, and bans. Thus, measuring their responsiveness to price is important in determining the optimal level of taxation and the impacts of legalization. Contrary to conventional wisdom, studies find that the consumption of addictive substances is quite sensitive to price.
In some ways it would benefit the economy by increasing the tax revenue that is collected by the government. People that are under the legal drinking age, especially college students, create unsafe environments for them to binge drink. This could possibly be eliminated by lowering the minimum age so that 18 to 20 year olds can also drink in bars and private restaurants. As an adult, people should be responsible enough to make decisions that will not put their own lives in jeopardy. Young adults should be required to take an alcohol-education program so that drinking can be a privilege, not a right. There are many arguments that can be made against keeping the drinking age set at age
Currently volume based taxes, a major component of the alcohol tax, has remained mostly stagnant since the 1950s. This is due to most states not increasing the tax with the inflation, to match the cost of living. Increasing these taxes could decrease the rate of binge drinking, but there is also evidence indicating that it could hurt responsible consumers. Many people that suffer from binge drinking also suffer from alcoholism. They are more willing to pay higher tax rates for alcohol than their more responsible counterparts. Creating new taxes could hurt many responsible drinkers, while barely affecting the binge drinking population.
The drinking age in America should be changed and it is because the tax revenue caused by the increased population of drinkers will be paying more taxes for the alcohol produced. The maturity of the adult population changes through the span of three years, but adults can drink in other countries while fighting for it. In the year of 1919 prohibition for alcohol was introduced into America. The tax revenue from alcohol would increase due to the population of people buying alcohol would increase. Between the age of eighteen and twenty, there is a no tolerance for alcohol law throughout America. In the state of North Carolina, along with other states, at the age of twenty-one and older the alcohol level is 0.08 percent. Many European and South American countries have lower drinking ages, such as Germany being sixteen. However, teenagers in Germany can only buy beer instead of liquor. Introducing minor alcoholic beverages to adults at the age of eighteen reduces the amount of negative effects of drinking too much alcohol. Australia‘s drinking age is eighteen; however, some citizens in their country disagree with the drinking have tried to increase the drinking age to twenty-one to follow America. Fifty percent of Australians are for increasing the age, but fifty percent are for the drinking age of eighteen. Increasing the drinking age in Australia would not keep eighteen year-olds from drinking. The law of drinking at a lower age also applies to the standards in America. Many adults in America at the age of eighteen have no drinking privileges, which affects the maturity and economy drastically.
Serious health, safety, and economic consequences of underage drinking on a national level may include impairment in human brain development, financial costs in the $68 billion range (or $1 for every drink consumed, including costs of medical bills, income loss, and costs from pain and suffering), fatal crashes involving teens
Now let’s imagine a United States where the drinking age is lowered to age 18. What you would expect to see is that people would drink less because the temptation of drinking alcohol would be lowered. There would be a lot less alcohol related incidents because binge drinking rates decreased significantly due alcohol education and supervision. The mentality of “getting wasted” would also be gone because drinking would be treated as a normal social activity. Wow, if that really happens, drinking would be like how it is in Europe, where they have a lowered legal drinking age that actually works!
The Price Elasticity of Demand (commonly known as just price elasticity) measures the rate of response of quantity demanded due to a price change. The formula for the Price Elasticity of Demand (Ep)
The consumption of vodka in Russia is among the highest in the world. Along with the consumption, Russia can be credited among the highest in the world for vodka production and sales. Alcoholism in Russia has become a large problem that needs to be taken care of. Political Leaders in Russia are devising ways to put a restraint on the amount of alcohol consumed by citizens. The outstanding demand for vodka in Russia has greatly helped the economy to thrive in business for families, a strong market, and state tax revenue. The decrease in consumption of alcohol will lower the efficiency of the market for vodka. Is the Russian government more worried about its’ citizens well being, or an efficient market.
When demand is elastic as with Coca Cola products price changes affect total revenue. When the price increases revenue decreases and when the price decreases revenue increases. For Coca Cola if they notice a decrease in revenue they would offer products at a discount to increase revenue. They do this quite often with sales such buy 2 20 oz. bottles for $3 instead of the normal $1.89 each price