Comparison of Beer Consumption and Real Wage Growth in Australia and Germany

Running head: ECONOMICS
ECONOMICS
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ECONOMICS
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Market for beer
1. Comparison of rate of beer consumption between Australia and Germany
and best measure for making effective comparisons
Australia and Germany are two nations that have cultures well known for
their preference for alcohol consumption since centuries. Among all types of
alcohols, beer is one of the most preferred drinks among the people of these
nations. Beer production as well as consumption is extremely high, especially in
Germany. According to Alcohol.org (2017), Australia ranks last among top 25
countries for per capita beer consumption, while Germany ranks 5th. While
annual beer consumption in terms of 12 oz. beer is 23,156, 954,333 in Germany,
the number is 4,914,301,333 for Australia. This shows that annual beer
consumption is quite low in Australia compared to Germany. In 2015, the per
capita beer consumption in Australia was 72.4 liters per capita while it is 104.2
liters per capita in Germany (Smith 2017).
As highlighted by Bloomfield et al. (2003), the most effective measure for
alcohol consumption is the quantity-frequency index. This index measures how
often an individual drinks and by how much on a typical occasion for drinking.
However, it is assumed that higher the individuals report about consumption
level, more accurate is their actual drinking behavior.

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2. Reasons for difference in beer consumption between Australia and
Germany
Numerous different drinking attitudes and cultures exist across the world.
In case of Australia and Germany, both the countries have popular drinking
cultural history for more than 500 years. April 23, 2019 marked the 503rd German
Beer Day (Statistisches Bundesamt 2018) and the Germans enjoy their beer with
beer festivals, beer gardens etc. Germany is the first European nation to
introduce beer standards and quality control. The Bavarian minority, known as
the most beer loving people with yearly per capita consumption of 170 liters, also
contribute in creating the beer culture of Germany. They also celebrate
Oktoberfest beer festival (Convictcreations.com 2019). Australia is also known
for its beer culture but the Aussies prefer other types of alcohol also such as
wine. The wine market of Australia is larger than the beer market, while Germany
is the major producer of beer. Around 6000 beers are produced in more than
1350 breweries in Germany, where half of these exist in Bavaria (Germany.travel
2019) and hence, the local breweries supply a large amount of local beers at a
low price. Thus, another major reason for difference in beer comparison between
Australia and Germany is the price of beer. Beer in Germany is extremely cheap.
The price of a case of beer is around €12 or USD 17 while the beer price in
Australia is one of the highest in the world (Kaplan 2017) and a 500ml bottle of
beer in Melbourne is USD 6.70 or AUD 8 and in Sydney, it comes for USD 5.40
or AUD 8.

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3. Price elasticity of beer demand in Australia and factors affecting the
elasticity of demand of beer
Price elasticity of demand for a product refers to the percentage change in
the quantity demanded due to one percentage change in the price of the product
(Jawad et al. 2018). As per the Australian culture, beer is considered to be a
normal good, for which, changes in price do not affect its quantity demanded
significantly. Factors that affect the elasticity of beer demand are its price,
varieties, substitute alcohol varieties, such as, wine, whiskey, and other types of
spirits, income of consumers, tastes and preferences, culture, brand name etc.
However, type of good and price are the prime factors that affect the price
elasticity of demand of beer (De Loecker and Scott 2016).
Beer market is not homogenous as numerous varieties are available at
different price levels, and hence, during price rise for a particular variety,
consumers usually switch to low priced varieties. Thus, elasticity for beer is
treated as relatively inelastic (De Loecker and Scott 2016).