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
Lowering the criterion on blood alcohol content would make a lot of responsible social drinkers become criminals. A 170 pound man could get to .05 by drinking three beers in an hour, and a 137 pound woman by drinking just two, which means that the man could be legally impaired if he had three drinks, but the woman could earn a set of handcuffs with only two drinks.
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.
Regrettably, the demand for drugs is considered to be relatively inelastic (at least in the short term). As a result, an increase in prices, generally speaking, may not lead to a substantial decrease in the quantity of drugs demanded. In essence, addicts will buy no matter the price. Factors that affect demand may include income level, the time frame (i.e. spring break or New Year’s Eve), and the availability of other substitute goods.
In conclusion a beer license isn’t going to help the drinking problem at all. Alcoholics are still going to the alcohol that they want. The beer license is only going to cost the 90% of the population who does not have drinking problem who in the first place do not need the license.
He contends that the law of demand is the most famous in economics and is also the truest law for many economists. One of the reasons for this belief is that elasticities allow economists to quantify differences among markets without standardizing the units of measurement (Aycock, 2010). The law of demand explains that, other things equal, when the price of a good rises, the quantity demanded will fall and when the price of a good falls, the quantity demanded will rise. In terms of elasticity, the price elasticity of demand (PED) measures how sensitive consumers are to a change in price (McConnell et al., 2015, p.134). Prices are elastic when a change in price causes a larger percentage change in quantity demanded. For example, if the price of a Snickers bar falls 20% but demand increases by 80%, PED = -4.0. This change in price may prompt consumers to buy alternative candy bars. Inelastic price changes causes a smaller percentage change in quantity demanded. If the price of tobacco falls 30% but demand only increases by 10%, PED = -0.33. Since it is so addictive and does not have a substitute, if the price of cigarettes increases people who smoke will likely continue to do so (Pettinger,
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.
Firstly I should look at the elasticity of alcohol relative to a person's income shown in figure 1. From this diagram it is clear that alcohol consumption has increased by 5 litres in the period between 1960 and 2000. This is as in 1960 you find that the average price of alcohol, relative to their income would be approximately 220 units which leads to 6 litres of alcohol being consumed by the average person. This is in comparison to in 2000 when we see that the price of alcohol relative to income is now approximately 90 units, this decrease in price has lead to the litres of alcohol consumed by the average person rising to approximately 11 litres. This shows that the more alcohol a person is able to afford the more alcohol they will drink.
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!
In conclusion, increasing alcohol prices is useful to reduce alcohol consumption and alcohol-related sexual assaults on college campuses. Compared to other methods, such as awareness programs and “dry campuses” policy, price policy is an economic strategy, and a change in alcohol prices has an impact on the whole market. Warren Buffett once said, “Price is what you pay. Value is what you get”. When customers before purchasing a product, they will consider whether it is worth paying such amount of money to get the product. Once they think the value of what they will get is equivalent
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
The proportions of accidents to people would remain virtually unchanged, so the data is not implying that young drinkers are more irresponsible. Some statistics claim that the legal drinking age of 21 saves approximately eight-hundred 18-20 year old lives a year, and that you can not put a price on a life. Adversely, the legal drinking age is enforced very loosely in some places. Especially on college campuses, teenagers continue to drink. It has been said that “Underage drinkers drink on fewer occasions, but when they drink they are more likely to binge drink” (Wechsler). With college students disrespecting the law now by participating in binge drinking, age twenty-one supporters argue that the law should be stricter. 18- 26 year olds now enter college with less binge drinking than past teens, but leave participating in more binge drinking than past 26 year olds (Jager). Along with this, recent data suggests that daily alcohol use has declined for 18-20 year olds since the 1980’s, but 21-24 year olds have not experienced a decline, just a shift from regular drinking to binge drinking. Binge drinking has increased over the past ten years, but 18-20 year old
Elasticity is also prominent to businesses. The price elasticity of demand is very important for companies to determine the price of their products and their total sales and revenue. Newell showed that by cutting the price of the Left 4 Dead game in half to $25 during a Valve promotion, its sales increased by 3000 percent (Irwin, 2009)viii.
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.