Supply And Demand Report

Part A

Introduction

The law of demand and supply, and the factors affecting demand and supply will be covered by using the binge drinking situation in this report.The concept of demand and supply is building block of market dynamics. The concept of demand says that as the price increases, the no of quantity demanded decreases. While the concept of supply says that with increase in price of goods, the supply of quantity of goods increases.
The change in demand and supply is different from law of demand and supply.It says that with change in non price factor,there is shift in demand and supply either to the right or to left.

The market equilibrium will change with change in demand and supply.As demand increases, equilibrium price will

This will lead to demand curve D1 shift to the left which will result in decreased quantity demanded and decreased prices of alcohol products.
And it has a direct relationship with demand i.e as taste and preferences is lost for binge drinking, the demand also decreases.

Situation 2- Liquor manufacture use advertising campaign to counter a government anti-binge drinking campaign.

Explanation

To counter government anti-binge drinking educational campaign, the liquor industries started the advertisement campaign which reduces the effect of government educational programme, thus increasing the binge drinking and liquor consumption to previous demand level D1.
The increased tastes and preferences for binge drinking can continue and create a new demand curve D3 which shows that demand has increased for binge drinking with continuous advertising campaign changing the taste and preferences of

This is due to direct relation between increased tax on alcopops and increased price & indirect relation between increased tax on alcopops and decreased supply of alcopops.
The taxes are the non price determinants which lead to increase in production cost, thus supply will get decreased.
The government increases tax on alcopops to combat the reduction of binge drinking because here government has the information that alcopops have been very popular with young drinkers and in this the spirit is mixed with soft drinks. And the aftereffect has been noted as increased violence,unwanted pregnancies, motor vehicle accidents, and the dysfunctioning of liver and brain.

Situation 4b Effect on price and quantity sold of other alcoholic drinks for which tax have remains unchanged

Graph

Explanation

As the tax on other alcoholics drinks remain unchanged and the tax on alcopops is high, the demand will increases for alcoholic products for which tax is unchanged and the price will increases for other alcoholic