Using the extracts and your own economic knowledge,

evaluate possible economic policies, other than increasing

the age limit that a government might use to reduce
significantly the consumption of alcoholic
Alcohol is a good with long term private and social negative effects in the health of the
individual along with an effect on society in millions of pound of taxes being spent on the NHS
for these alcohol related health issues that therefore only benefit those who get alcohol
related illnesses. Thus, Alcohol is a demerit good, a good that would be over consumed in a
free market which is considered unhealthy, degrading or otherwise socially undesirable, and
with negative externalities when it is consumed. A negative externality is when the social
costs of the good is greater than the private costs and the free market doesnt account for it,
so there is no compensation paid to cover those costs, so market failure occurs. Thus in the
example of alcohol which society and the government feel is generally over produced, so
government intervention takes place in many forms to correct the market failure.
Governments can intervene is many different ways, such as through in increase in taxation,
minimum pricing and increase advertisement of the effects of the demerit good, in the case
alcohol.
While an increase in taxation may not be advisable as in 2008 Britain already are amongst
the highest taxers of alcohol in Europe, with beer and wine taxed at 33p per pint, it is still a
very viable possibility in reducing the supply and therefore the consumption of alcohol within
the UK as shown on the demand and supply curve bellow. This curve illustrates the same
demand however a lower quality demanded as the tax and
therefore the price of the product has increased for the
consumer. Due to this decreased quantity, Q to Q1 this leads to
a decreased supply at each price. The act of increasing tax has the
effect of the equilibrium of a higher price and a lower quantity as
illustrated in P1 and Q1 compared to P and Q. Therefore an
increase in tax would decrease alcohols consumption
however it could also punish those who the government arent
actively trying to discourage and businesses relating to
alcohol which in turn Have a negative effect on the economy.
Minimum pricing is when the government intervene to keep
price above a certain point Minimum price is also referred
as a price floor as the price cannot drop below that point
legally. The minimum price would be above the equilibrium
(p*,q*) as shown in the first diagram bellow this will reduce the
quantity consumed from q* to qd which will achieve the policies
purpose
of reducing consumption of alcohol however it will create excess
supply
which is market failure in too much of a good being
produced and also raises the question affordability. Again
a
minimum price would harm everyone not just the niche the
government
are trying to reduce and therefore could lead to huge damage in
the alcohol industry. They may lose the support of responsible drinkers who feel that the
policies are unfair on them. And in many peoples opinion it Is wrong to allow drunken yobs to
deprive ordinary customers of the opportunity to buy Beer, Wine and Spirits at a reasonable
market price And therefore it would be a risk for the government to deepen market failure
because of political self-interest. The second diagram shows how a minimum price would
work in terms of looking at externalities with the minimum price reducing the amount of
alcohol consumed to that of a socially efficient amount with an equilibrium being formed
between the marginal social benefits and the marginal social/private costs rather than an
equilibrium as there would be in a free market between marginal private benefit and marginal
private costs. Therefore Minimum price is an effective solution to the problem in terms of
reducing consumption of alcohol however comes with political and economic risks in the
economy undoubtedly being damaged.
the
to

Other possible policies include the use of education to correct the problem of imperfect
information and an information gap in terms of the social costs and even the private
costs. Advertising could portray future problems such as liver damage, with an
aim to help
people
realise what
damage
alcohol can
do and
therefore
reduce their
consumption
privately
without the
need of
controversial
national
legislation.
Educating
children in
school would also
go a long
way towards
changing the
culture of binge
drinking in
the U.K, though
this is a
costly and would inevitably be a long term project in cultural changes being slow. An increase
in negative advertising would have the effect of decreasing demand as shown on the diagram
which therefore leads to the decrease of the quantity of alcohol consumed from Q to Q1 and
serving its purpose of decreasing consumption of alcohol.
In conclusion there is no one clear solution to the reduction of alcohol and a combination of
policies would be most effective in minimalizing consumption of alcohol and the binge drinking
culture. Although if one policy had to be selected it would be that of minimum pricing as it
would involve a sudden drop in alcohol consumption which would force cultural changes
rather than the second best option of filling the information gap which too would result in
cultural changes but over a massively long period in comparison and therefore a minimum
price being added in my opinion is worth the risk for the government.