Effects of Minimum Price on Alcohol in Economic Way

ECONOMICS
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TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Ineffectiveness of market outcome in case of Demand and supply of alcohol...........................3
Various external cost that are imposed on society for excessive consumption...........................4
Price floor may impact market for alcohol and the way consumption of alcohol adjusted to
effective level...............................................................................................................................4
Impose of Tax..............................................................................................................................5
Recommendation.........................................................................................................................5
Elastic and inelastic.....................................................................................................................6
Impact of changing climate.........................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Alcohol is currently one of the prime need of people in many places. In the western
culture, most people daily consume alcohol, because it is term of joy for those people. Currently
many people have addicted to take alcohol, that’s companies or businesses who produces alcohol
has succeeded in gaining large market share in all around the world. There are many factors
always affects demand and supply of alcohol products in the international market, like
geographical factor, economic factor, social factor, income factor etc. In this situation, currently
demand and supply of alcohol is completely depending on these all factors. This report mainly
discusses effects of the minimum price on alcohol in economic way. Basically, governments of
the different countries including Australia are considering implementing a minimum price on
alcohol.
MAIN BODY
Ineffectiveness of market outcome in case of Demand and supply of alcohol
Demand refers to desire of large number of people to purchase particular products and
services by paying specific amount of money. There are various factors that lead to increased in
demand of products but among them prices is most important component that impact on demand
of products such as alcohol. On the other hand supply refers to amount of products and services
that individual is like to sell at particular price in order to earn profit. Demand of alcohol is
continuously increasing in Australia that has impacted adversely on health of people so
government has set minimum floor price of product. Therefore it can be stated that price is most
important factor in getting effective market outcome (Catalini and Gans, 2016). But in Australia
there is large demand of products and services instead of rise in price of alcohol this is due to
high addiction of people toward such drink. Supply of products increase with increase in demand
but price of alcohol is not decreased due to high tax rates and various restrictions such as
minimum price that need to be charged from customers. Thus, it can be illustrated that despite of
changes in supply and demand of products market outcome were ineffective due to high control
and intervention of government in manufacturing and supply of alcohol products. Total surplus
in society is reduced in Ineffective outcome market due to price control because it is blocking
both consumers and supplier to make transaction as per government set standard (Athey, 2018).
Price ceiling or tax is another method that is used by government in which burden of producer is
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