Market Failure and Alcohol
How to tackle alcohol abuse
There are many market failures associated with alcohol such as increased anti-social behaviour, an increased cost on healthcare and reduced productivity. A minimum price is the best way to tackle market failures associated with alcohol. Market failure occurs when an economy fails to deliver and efficient allocation of resources; a minimum price is set above the equilibrium in order to raise the price of the good. A minimum price can act as a deterrent for the good and can be beneficial for certain businesses such as pubs. The minimum price would cause people to pay the social cost for alcohol and discourage young drinkers from overconsumption. However it could reduce living standards for those on low incomes and supermarkets would use it as an easy way to increase profits. Taxation can be used to raise the price of alcohol and in effect create the same result of a price floor. However taxes can be regressive which means the tax takes a larger percentage of a lower-income than it would of a higher income.
Alcohol’s demand is relatively inelastic. This means even with the introduction of the minimum price demand will not fall a great deal. Supermarkets will have to raise their price due to the new laws and will in turn make more revenue. They will see the same demand and be selling for a greater price.
The minimum price will affect cheaper drinks more than more expensive ones. If the minimum price is per unit of alcohol cheaper drinks will see a greater percentage increase in their price. This means that some businesses will lose out far more than others.
The minimum price is specially calibrated to target drinks that are disproportionately consumed be consumers on low incomes. This means it is regressive. Consumers on low incomes will be priced out of many drinks. This will create a large incentive for a black market. Black markets are very hard and are very expensive to stop.
Creating a better education campaign for alcohol is an
There are many market failures associated with alcohol such as increased anti-social behaviour, an increased cost on healthcare and reduced productivity. A minimum price is the best way to tackle market failures associated with alcohol. Market failure occurs when an economy fails to deliver and efficient allocation of resources; a minimum price is set above the equilibrium in order to raise the price of the good. A minimum price can act as a deterrent for the good and can be beneficial for certain businesses such as pubs. The minimum price would cause people to pay the social cost for alcohol and discourage young drinkers from overconsumption. However it could reduce living standards for those on low incomes and supermarkets would use it as an easy way to increase profits. Taxation can be used to raise the price of alcohol and in effect create the same result of a price floor. However taxes can be regressive which means the tax takes a larger percentage of a lower-income than it would of a higher income.
Alcohol’s demand is relatively inelastic. This means even with the introduction of the minimum price demand will not fall a great deal. Supermarkets will have to raise their price due to the new laws and will in turn make more revenue. They will see the same demand and be selling for a greater price.
The minimum price will affect cheaper drinks more than more expensive ones. If the minimum price is per unit of alcohol cheaper drinks will see a greater percentage increase in their price. This means that some businesses will lose out far more than others.
The minimum price is specially calibrated to target drinks that are disproportionately consumed be consumers on low incomes. This means it is regressive. Consumers on low incomes will be priced out of many drinks. This will create a large incentive for a black market. Black markets are very hard and are very expensive to stop.
Creating a better education campaign for alcohol is an