As excess alcohol consumption has become an increasing issue for global societies, government intervention must be considered by taking into account the market for alcoholic beverages and the nature of its supply and demand. This, in effect, addresses a much wider issue as to which type of government intervention—tax or minimum price—is more effective.
Policy makers aim to reduce the consumption of alcohol and therefore knowledge of demand for alcoholic beverages is of great importance. The demand refers to the quantity of alcoholic beverages consumers are willing to buy at a particular price and at a particular time, however, this will vary according to the type of alcoholic beverage; beer, wine or spirits. The article, Alcohol Pricing: Mulled Whines by The Economist (2013) suggests that ‘the global consumption of alcohol has been stable since 1990’ insinuating that the demand for alcoholic beverages is inelastic at current. Furthermore, there is evidence to suggest that a 5% decline in consumption will result from a 10% rise in price of alcohol which a Price Elasticity of Demand (PED) of -0.5 can be derived from—an unambiguous result of inelasticity where a change in price [Fig 1] does little to change in quantity demand.
Figure I: The PED for alcoholic beverages.
But in the interest of the policy maker, the overall PED for alcoholic beverages is fairly vague. Segmenting the demand into its subgroups beer, wine and spirits which have the PED of -0.27,-0.24 and -0.6, respectively (REF) illustrates which government scheme on which type of alcohol is more effective. For example, wine is relatively more inelastic than other alcohol types. Figure II explains that increasing the price of wine from P0 to P1 will do little to decr...
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...ach alcohol type, consumers only pay for part of the tax while producers are charged the rest.
Previous case studies have proved that taxing alcohol does little to stop over-consumption by heavy drinkers. The Economist article explains that in some European countries, wine and cider are taxed by volume. A sweet wine with 6% alcohol incurs the same tax as Riesling with 10% implying that alcoholic beverages are taxed regardless of the alcohol level and thus the tax policy does not directly deal with hazardous drinking. Meanwhile in Scotland, an overall price floor set at a unit price of 50p will mean that cheaper types of alcohol will be affected more than those that are expensive. Since “80% of alcohol is drunk by 30% of boozers” in Scotland, this will directly target the demographic of heavy drinkers as heavy drinkers will generally opt for the cheapest option.
...vity to rise. Today, the use and abuse of alcohol continues to grow in the United States.
Companies and businesses that sell alcohol have a common interest in the issue of whether the legal drinking age should be lower...
Harwood, H. (2000). Updating Estimates of the Economic Costs of Alcohol Abuse in the United States: Estimates, Update Methods, and Data. Rockville, MD: National Institute on Alcohol Abuse and Alcoholism.
Alcohol has been around since ancient times, the original purpose was to treat water for bacteria. However as time went on people began to find other uses and side effects of alcohol. Human nature is of course is to either make money off of, or enjoy to the heart’s content and available substance. Today’s culture of social media, celebrity heroes, and pressure to fit in has driven many people, young and old, to drink. The effects of alcohol are what drive many over people to drink. Euphoria, forgetfulness, playfulness, social confidence, and courage are all some of the feelings many gain from consumption. Many people, especially new drinkers or teenagers do not understand the danger and adverse effects the alcohol has not only from long term but also short term consumption. Today’s drinkers are highly uneducated and do not understand key issues surrounding alcohol like:
Mike Brake’s “Needed: A License to Drink” is a well-written essay that covers the serious issue of alcoholism and goes on to offer a creative proposal to solve the situation. Brake addresses alcoholism as a “primary public health-problem” which holds merit, considering Brake sites alcohol is the cause of 19,000 auto fatalities each year. To remedy these preventable fatalities, Brake proposes to institute a national system of licensing with appropriate penalties for violators. He goes on to say that these licenses should be issued the same way as driver’s licenses. An applicant would have to read a manual, and take a written exam which would include questions such as “How many drinks would it take to intoxicate a 150lb man?” and “What is the penalty for drunk driving?” After passing the written test applicants would be issued a drinking license that would be required for buying any alcoholic drink.
Economic returns in the global market place have been influenced by trends in wine consumption. Figure 2 shows a trend of decreasing wine consumption from 2007 - 2011 in most old world countries while new world countries were increasing their consumption. This is due to the diversification of alcoholic beverages in the old world countries and the growing wine popularity in the new world
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 ...
Alcoholics that are trapped so deep in the spell of alcoholism are leaving a legacy behind for those who continue to make alcohol companies millions of dollars by ruining their lives, making the wrong investment every time they purchase a bottle of alcohol; to them an “alternative route” to mask any issues they might be encountering at a particular time in their lives, and to those alcohol-making companies they are walking fortunes—walking billboards. Advertisement ads for these products continue targeting not only the already alcoholics, but also targeting underage drinkers. These alcohol-making companies can argue differently and have sworn to not be so focused on targeting people under 21. “Alcohol advertisers have pledged to comply with self-regulatory codes designed to limit t...
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.
The debate of whether the minimum legal drinking age should be lowered or not has been around for many years even since the National Minimum Drinking Age Act of 1984 raised the MLDA to age 21. Prior to that, the government has t...
The best way to keep people away from alcohol is to make it hard enough for people to get alcohol; make them suffer to get the alcohol they need. Some of the ways a government could limit the use of alcohol is to increase its price dramatically by adding additional taxes and fees on those who sell alcohol so that its price will increase and wont be affordable for most of the people. The income of this increment should be spent on national awareness through media which would spread out the word about alcohol to people and warn them about the use of this evil product. Another restriction would be increasing the legal age of alcohol buyers from 21 to a higher age at which people would be responsible and think twice about the consumption of alcohol; a reasonable age would be around 25 I believe. Increasing the requirements of issuing alcohol licenses would limit the number of stores that sell alcohol so that people will need a bit more of time to get alcohol from a far place. In addition, limiting the quantity of alcohol sold to one individual would make him waste lots of time each time he wants to buy alcohol.
Solving the issue of whether taxes should be raised on alcoholic beverages is very difficult. I believe that volume taxes should be raised to match the rate of inflation. However, more research needs to be conducted before choosing to increase taxes by a rate that would deter responsible
Consumption pattern in the Philippines is shifting over time. Once, the main priority for expenditure is on food, then education and health. Now, part of the expenditure pattern of an average Filipino is to spend a portion of their income on leisure and relaxation. Part of leisure expenditures are the buying of alcoholic beverages. And one of the newest entrants in this commerce is the wine industry. It has posted the fastest growth rate of 15% in 2005 among the alcoholic drinks. The population now has increasingly warmed to wine. It has shifted from the mass spirits (beer) to the more sophisticated, affordable and healthier alcoholic beverage.
Alcohol has affected human lives in their own society every day since its dawning in the stone age, perhaps even earlier. Though alcohol is not illegal, it was when the eighteenth amendment was first ratified because of alcoholism. Alcoholism is entitled to those who abuse alcohol by over consumption to the brink of mental illness and compulsive behavior which then ultimately results in alcohol dependency. It affects many different groups of people, but it is affecting students in high school and college. They should not be affected considering the legal age to consume alcohol is twenty-one, but they are in fact being deterred from their innocence. Society depends on those of us that do not consume alcohol to bring the social, economical, and health related problems throughout society to decrease. When government officials governing alcohol realize that alcohol needs to be more monitored and cautioned, then and only then can this steep slope finally begin to depreciate.
When people think about alcohol, they think about a strong colorless volatile flammable liquid that is the intoxicating constituent of wine, beer, spirits, and other drinks. I strongly oppose the use of this beverage because this can be a very dangerous beverage to teenagers and adults. Alcohol has caused a lot of problems in the economy, and if people continue to misuse alcohol the number of deaths from alcohol will increase instead of decreasing. According to the National Highway Traffic Safety Administration statistics in 2011, the amount of 9,878 people died in drunk driving crashes, one every 53 minutes. Alcohol should be banned because alcohol is a really dangerous beverage which has brought a lot of sorrow and tragic stories to a lot of people’s lives and families, through driving, partying and making bad decisions.