Charlotte Keelan 9 May 2014 Economics The over consumption Alcohol is a price inelastic good, meaning that changes in price for the good do not affect the demand, also meaning that consumers are likely to easily find substitutes if just one . The market for alcoholic beverages is monopolistically competitive, meaning there are many firms in the industry, all producing relatively similar goods. The combination of these two means that policy makers have a range of mechanisms available to influence consumer behavior and curb consumption. Demand and price elasticity of demand are very important in relation to the consumption of a good (Why? Explain). The price elasticity of demand for alcohol overall is highly inelastic, meaning that the percentage change in quantity demanded is less than the percentage change in price (Hubbard et al. 2012). For the alcohol market as a whole, any price change on alcohol will have a very small effect on the quantity of the good demanded. Within the alcohol market, each type of alcohol (sub-types) has different elasticity, as there is likely to be a number of close substitutes. Demand of inferior alcoholic products, such as ‘alcopops’, which are mainly consumed by young adults and teenagers, falls when the price of these products rises as they no longer become affordable and readily available. Although, with a rise in the price of cheaper alcoholic beverages and a fall in demand for these goods, there tends to be a rise in demand for other beverages, such as spirits and sodas for mixing, despite spirit generally being considered luxury goods (need to explain this better). Policy makers need to consider the pricing and demand implications when considering method to curb consumption of alcohol. Therefo... ... middle of paper ... ...me for price floors as a higher price in a price floor is also unlikely to affect those goods which are inelastic. As previously stated, taxes are also likely to result in higher consumption of those goods which are substitutes for the goods being taxed. This can be seen in an increase in consumption of spirits, soda, wine and beer when a tax on pre mixed alcoholic drinks was introduced. With both price floors and taxes there is a loss in economic efficiency as some people win, while others lose. Price floors also cause the marginal benefit of the last unit produced of the good to be greater than the marginal cost of producing it, this is represented by the dead weight loss. This is also a representation of the reduced surplus caused by the price floor. Therefore, the policy makers chose to use a price floor over a tax as taxes often have redistribution effects and
Businesses wanted to move forward within their industry, so by taking away alcohol they thought it would become more productive.
Companies and businesses that sell alcohol have a common interest in the issue of whether the legal drinking age should be lower...
...vity to rise. Today, the use and abuse of alcohol continues to grow in the United States.
We the consumer would rather pay less for any product that is needed or want. Ultimately we are the reason for high prices as well as low prices. Prices of products do not always stay the same and more popular products have higher prices than less popular products. These fluctuations, high prices and low prices are from the idea of supply and demand. Supply and demand defines the effect that the availability of a particular product and the desire or demand for that product has on price. Generally, if there is a low supply and a high demand, the price will be high (Investopedia). To understand the idea of supply and demand, the understanding of supply and the understanding of demand must be defined. The Law of Supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, also that the supply increases as prices increase and decreases as prices decrease (Curriculum Link). The Law of Demand states people will buy more of a product at a lower price than at a higher price, if nothing changes, at a lower price, more people can afford to buy more goods and more of an item more frequently, than they can at a higher price and that at lower prices, people tend to buy some goods as a substitute for others more expensive (Curriculum Link). In todays economics these ideas are seen frequently in everyday life. The laws of supply and demand are seen in many ways in the company Apple Inc. Each year Apple Inc unveils a long awaited mobile operating system and IPhone. We can also see many aspects of the law of supply and demand in Nike Inc’s Jordan Brand. Jordan Brand has released a number of...
...e. A price gouger needs to charge more in order to avail the product or service. In the case of Raleigh, the roads to the town were not accessible due to fallen trees and rocks. An entrepreneur would need to cut the trees and remove the rocks in order to take the product there. People who do that need compensation for all the trouble they take to bring products to the market. The youths who brought ice to Raleigh town had to cut down trees in order to access town. Instead of selling ice as the “right price” of less than 2 dollars, the youths charged more than 8 dollars. The price provided just there right compensation for all their efforts. Banning price gouging led to serious suffering of the people because the little food left went bad causing even more losses. For a few dollars for the price of ice, Raleigh residents could have saved millions worth of food.
Alcohol plays a major role in society today. It is constantly being in our minds through advertisements, whether its commercials or
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.
Throughout history alcohol has been a common drink in social and celebration environments. However in today’s society it is easily accessible, very cheap, and advertised on every channel available. Alcohol has taken over our society, from teenagers to seniors, everyone is exposed to the culture of drinking. That is not the issue though, the issue is in today’s society gluttony is a common virtue and many people take drinking beyond social and celebration environments. Many Americans suffer from a disease known as alcoholism, it is not only the addiction to, but the inability to function without alcohol. Just like many other substances, in excess alcohol can create many issues within the body both mentally and physically, this is the issue behind alcoholism.
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...
Price Elasticity is the measure in responsiveness of consumers to changes in the price of a product or service. The evaluation and consideration of this measure is a useful tool in firms making decisions about pricing and production, and in governments making decisions about revenue and regulation. “Price Elasticity is impacted by measurable factors that allow managers to understand demand and pricing for their product or service; including the availability of substitutes, the consumer budgets for the product or service, and the time period for demand adjustments.” The proper consideration of Price Elasticity allows managers to set pricing such that the effect on Total Revenue is predictable and adjustments to production are timely. The concept of Price Elasticity is employed in the management of commercial firms and government.
Price Elasticity of Demand for Cigarettes (a) Studies indicate that the price elasticity of demand for
...trospective revenue of the company, rendering a price floor incapable of increasing revenue, which is the goal from the beginning.
There are roughly 80,000 deaths that are related to alcohol abuse every year, making it the 3rd highest cause of death in the United States. Every day more and more people are losing their lives to alcohol related illnesses and incidents. Alcohol is in fact a drug that has little to none health benefits. This topic is easy for me to write about because I believe that alcohol should be illegalized. Although it would be a long hard road to make alcohol illegal I think the benefits would outweigh the consequences. If alcohol was made illegal there would be less fatalities in the United States.
Cook, Philip J., and Michael J. Moore. "Health Affairs." The Economics Of Alcohol Abuse And Alcohol-Control Policies. Health Affairs, n.d. Web. 03 Apr. 2014.
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.