Economics of Business: Beer and Labour Market Analysis

This document provides an analysis of the beer and labour market in Australia and the United States. It covers topics such as beer consumption, price elasticity of demand, excise tax, minimum wage, and wage growth.

Running head: Economics of Business
Economics of Business
Name of the Student
Name of the University
Student ID

1Economics of Business
Table of Contents
Beer Market.......................................................................................................................2
Answer 1........................................................................................................................2
Answer 2........................................................................................................................2
Answer 3........................................................................................................................3
Answer 4........................................................................................................................4
Answer 5........................................................................................................................5
Answer 6........................................................................................................................5
Labour Market....................................................................................................................6
Answer 1........................................................................................................................6
Answer 2........................................................................................................................6
Answer 3........................................................................................................................7
Answer 4........................................................................................................................9
References.......................................................................................................................10
,

2Economics of Business
Beer Market
Answer 1
Based on beer consumption rank of Australia was 24 in 2016. In that year the
Australians consumed 1, 73, 500 Kilo litres of beers. The United States have been
chosen to make the comparison with Australia regarding consumption of beer.
According to beer consumption data in 2016, the people of the United States consumed
2, 42, 45, 000 Kilo litres of beer and holds the second position in this category.
However, when per capita beer consumption data of 2016 are considered then it is
found that the rank of Australia was 23 and that of the United States was 211. The per
capita consumption of beer of the United States had been recorded at 74.8 litres and
that of Australia was 71.4 litres. Thus, it can be said that per capita beer consumption is
a better measure to compare the pattern of consumption of beer between the two
countries than the measure of total consumption.
Answer 2
According to population the United States is much larger country than Australia.
Thus, it is obvious that the total consumption of beer would be higher than Australia any
day. The population of Australia is around 1/15th of the population of the United States.
Thus, population is the main reason that explains the difference in total beer
consumption between the two countries2. There are other factors that influence the
consumption of beer in both the countries and that are income level, climatic condition,
taste of individuals, rules and regulations set by the government regarding alcohol
1 Kirinholdings.co.jp (2019). Kirin Beer University Report Global Beer Consumption by
Country in 2016 | 2017 | News Releases | Kirin Holdings. [online] Kirinholdings.co.jp.
Available at: https://www.kirinholdings.co.jp/english/news/2017/1221_01.html.
2 Silva, A.P., Jager, G., Van Zyl, H., Voss, H.P., Pintado, M., Hogg, T. and De Graaf, C.,
2017. Cheers, proost, saúde: Cultural, contextual and psychological factors of wine and
beer consumption in Portugal and in the Netherlands. Critical reviews in food science
and nutrition, 57(7), pp.1340-1349.

3Economics of Business
P
PT
Price D*
S*
Quantity
Q
T Q
consumption. Therefore, per capita beer consumption is useful gives a more micro
information regarding the economy as it can be understood from it that the United
States and Australia are not so different in terms of development and individual income.
Answer 3
Price elasticity of demand of a product is the degree of responsiveness of the
demand of the product to its price alteration ad it depends on various factors3. Thus, in
the case of beer price elasticity of demand follows the same rule. Beer is considered as
addictive good because it contains alcohol. Hence, the demand curve of beer is
inelastic in nature that means demand of beer change less proportionately than the
change in its price. The other factors that affect the demand for beer are income level of
consumer, climatic condition of the place, availability of substitute, price of the
substitutes, government regulation and preference of alcoholic drinks and health
awareness of consumers. Therefore, all the mentioned factors are effectively impact the
price elasticity of demand of beer.
Answer 4
3 Jawad, M., Lee, J.T., Glantz, S. and Millett, C., 2018. Price elasticity of demand of
non-cigarette tobacco products: a systematic review and meta-analysis. Tobacco
control, 27(6), pp.689-695.

4Economics of Business
Figure 1: Excise tax on Beer
Source: (Created by the Author)
The government imposes tax on consumption of beer because it contains alcohol
and thus it is harmful for health. The tax is imposed with the objective of reducing the
consumption by discouraging4. This policy is used because price and demand shares
inverse relationship that means with increase in price demand decreases and vice
versa. In figure 1 PT is the price of beer after imposition of tax and QT is the equilibrium
quantity. However, it is evident from the figure that due to rise in price the change in
demand is very small and it is not a significant change due to which the tax is imposed.
It happens due to inelastic nature of demand curve. Therefore, it can be said that
imposition of excise tax on beer consumption is not that effective.
Answer 5
Alcohol consumption requires money because one can consume it by purchasing
it from market. Thus, buying price is the foremost cost of alcohol consumption.
However, there are other cost of beer consumption that are not direct but are important.
The other costs of consumption of beer are health issues and expenses related to
health issues that arises due to consumption of beer. On the other hand, there is only
one benefit of consuming beer and that is self-pleasure, which is much less important in
comparison to the cost of beer consumption. Hence, considering the issues of beers
consumption government imposes excise tax in order to reduce beer consumption5.
4 Yeomans, H., 2019. Regulating drinking through alcohol taxation and minimum unit
pricing: A historical perspective on alcohol pricing interventions. Regulation &
Governance, 13(1), pp.3-17.
5 Tessler, R.A., Mooney, S.J., Quistberg, D.A., Rowhani-Rahbar, A., Vavilala, M.S. and
Rivara, F.P., 2019. State-level beer excise tax and firearm homicide in adolescents and
young adults. American journal of preventive medicine, 56(5), pp.708-715.

5Economics of Business
With reduction of beer consumption the health of people will improve and thereby
productivity of people increases such that economy will grow at a faster rate and social
welfare increases.
Answer 6
There are various polices that the government of Australia implemented to
reduce consumption of alcohol except tax imposition. The policies that the country
implemented are legal age for consuming alcohol, drink driving, limit on selling of
alcohol, restriction on location of drinking and labelling. Implementation of these policies
turned out to be quite effective in reducing alcohol consumption. Legal age of drinking
restricts minors from consuming alcohol, drink driving avoids accidents, limit in selling
reduces the consumption of alcohol and restriction in location also reduces the
consumption of alcohol and nuisances. Thus, these policies does not only reduce
consumption of alcohol but also reduce other negative incidents that occurs due to
consumption of alcohol6. Among all these policies most effective are drink driving, legal
age and limit in selling of alcohol. Any person violating any of these norms will suffer
from state punishment. Thus, the government of Australia has successfully
implemented these polices and it seems that the policies are more effective than tax on
alcohol.
Labour Market
Answer 1
Wage growth is commonly known as the amount of increase in income of an
individual over one year time. Wage growth is a nominal measure of increase in income
and it does not consider inflation rate and thus it gives the absolute change in income7.
6 Livingston, M. and Dietze, P., 2016. National survey data can be used to measure
trends in population alcohol consumption in Australia. Australian and New Zealand
journal of public health, 40(3), pp.233-235.
7 Arsov, I. and Evans, R., 2018. Wage growth in advanced economies. RBA Bulletin,
March, viewed, 10.

6Economics of Business
Therefore, it can be said that purchasing power of an individual does not increase in the
same proportion the wage grows. To understand the real change in purchasing power
of individuals of an economy it is necessary to consider the inflation rate and thus real
wage rate is considered as the appropriate measure of change in purchasing power.
Answer 2
Figure 2: Wage growth in Australia
Source: (Tradingeconomics.com 2019)
Figure 3: Wage growth in the United States

7Economics of Business
Source: (Tradingeconomics.com 2019)
From figure 2 it can be observed that the wage rate in Australia has steadily
declined in the last ten years. On the other hand, figure 3 depicts that wage rate in the
United States has increased gradually in the last ten years. In 2009, the wage growth
in Australia was above 4%. After 20096, the growth in wage rate was unstable and kept
on declining. It is observed that in Australia growth in wage rate was over 3.5% during
2011 to 2013. Conversely, the wage growth rate declined again and kept on declining
until 2017. After that it grew a little but was not enough for considering it as a growth in
wage. In the case of the United States the scenario is completely different, the wage
rate has grown over the years and the current average wage growth rate is above 5%.
Therefore, it can be concluded that both the countries have different trend in wage
growth rate.
Answer 3
The minimum sum of money that an employer must pay to its employee is known
as the minimum wage8. In the month of May 2019 the Fair Wage Commission fixed new
minimum wage rate in Australia and are $740.80 per week and $19.49 per hour9. Under
the law of minimum wage, the employer will be penalized if he/ she does not follow the
law and pay the minimum wage to its employee. The illustration of minimum wage is
given figure 4 below. Minimum is fixed above the free market wage rate and thus at this
wage rate demand for job increases and more number of workers join the work force
with expectation of getting job10. Thus, the demand for jobs increases to JD from J*.
8 David, H., Manning, A. and Smith, C.L., 2016. The contribution of the minimum wage
to US wage inequality over three decades: a reassessment. American Economic
Journal: Applied Economics, 8(1), pp.58-99.
9 Employsure (2019). Minimum Wages Australia | Award Wages 2019 | Employsure
Guides. [online] Employsure. Available at: https://employsure.com.au/guides/wage-and-
pay/minimum-wage-australia/.
10 Dube, A., 2017. Book Review: The Long-Run Impact of Minimum Wage Research: A
Case Study of Myth and Measurement. ILR Review, 70(3), pp.818-823.

8Economics of Business
JS
W
W
M
Wage D
S
JobsJDJ*
However, at this level of wage rate employers reduce number of employees and thus
supply of jobs reduce to JS. Thus, at minimum wage rate WM, there occurs
unemployment which is given by the difference between JS and JD.
Figure 4: Minimum wage
Source: (Created by the Author)
Answer 4
Law of minimum wage is implemented to reduce the exploitation of employees
and increase their minimum salary. Therefore, increase in salary of employees in every
sector increases. Thus, the cost of studying will also increase and thus the foreign
student has to pay for studies after implementation of minimum wage law. Thus, burden
on student increase and many students might drop plan of studying in Australia and go
to some other countries. In addition to that, less availability of jobs in the market will
increase the burden of the student further. Apart from that the number of teachers will
be less and thus students will struggle to receive better education.

9Economics of Business
References
Arsov, I. and Evans, R., 2018. Wage growth in advanced economies. RBA Bulletin,
March, viewed, 10.
David, H., Manning, A. and Smith, C.L., 2016. The contribution of the minimum wage to
US wage inequality over three decades: a reassessment. American Economic Journal:
Applied Economics, 8(1), pp.58-99.
Dube, A., 2017. Book Review: The Long-Run Impact of Minimum Wage Research: A
Case Study of Myth and Measurement. ILR Review, 70(3), pp.818-823.
Employsure (2019). Minimum Wages Australia | Award Wages 2019 | Employsure
Guides. [online] Employsure. Available at: https://employsure.com.au/guides/wage-and-
pay/minimum-wage-australia/.
Jawad, M., Lee, J.T., Glantz, S. and Millett, C., 2018. Price elasticity of demand of non-
cigarette tobacco products: a systematic review and meta-analysis. Tobacco
control, 27(6), pp.689-695.
Kirinholdings.co.jp (2019). Kirin Beer University Report Global Beer Consumption by
Country in 2016 | 2017 | News Releases | Kirin Holdings. [online] Kirinholdings.co.jp.
Available at: https://www.kirinholdings.co.jp/english/news/2017/1221_01.html.
Livingston, M. and Dietze, P., 2016. National survey data can be used to measure
trends in population alcohol consumption in Australia. Australian and New Zealand
journal of public health, 40(3), pp.233-235.
Silva, A.P., Jager, G., Van Zyl, H., Voss, H.P., Pintado, M., Hogg, T. and De Graaf, C.,
2017. Cheers, proost, saúde: Cultural, contextual and psychological factors of wine and
beer consumption in Portugal and in the Netherlands. Critical reviews in food science
and nutrition, 57(7), pp.1340-1349.
Tessler, R.A., Mooney, S.J., Quistberg, D.A., Rowhani-Rahbar, A., Vavilala, M.S. and
Rivara, F.P., 2019. State-level beer excise tax and firearm homicide in adolescents and
young adults. American journal of preventive medicine, 56(5), pp.708-715.

10Economics of Business
Tradingeconomics.com (2019). Australia Annual Change in Hourly Rates of Pay | 2019
| Data | Chart. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/wage-growth.
Tradingeconomics.com (2019). United States Wages and Salaries Growth | 2019 | Data
| Chart | Calendar. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/united-states/wage-growth.
Yeomans, H., 2019. Regulating drinking through alcohol taxation and minimum unit
pricing: A historical perspective on alcohol pricing interventions. Regulation &
Governance, 13(1), pp.3-17.