Professor Bipin Khana
Principles of Economics
July 25, 2012
1. Suggest how an economist would approach the problem of alcohol abuse. Provide two (2) possible solutions to this problem. Include the four (4) elements of the economic way of thinking in your analysis. Alcohol abuse is a pattern of drinking that result in harm to one’s wellbeing, social affairs, or ability to work. Alcohol abuse includes failure to fulfill responsibilities at work, school or home; drinking in unsafe situations, such as while driving; legal problems associated with alcohol use; and continued drinking despite problems that are caused or worsened by drinking. Some say that alcohol abuse is a disease. Economists would approach the problem of alcohol abuse as cost. Economist uses the measure of alcohol consumption and the consequence behind the drinking. The economy pays $223.5 billion a year for people that drink and the government pays about 60% for their medical needs a well. Abusing alcohol can cause dementia; high blood pressure, cancer of the esophagus, liver, colon, and birth defect. When the individual is sick this reduces productivity in the workplace and can cause job loss and unemployment. This also causes problems in the home. Another effect is on society where as the abuser cause cost is driving under the influence. There are 79,000 people killed a year by drunk drivers. These accidents can have a medical and financial effect on others and the community when people are injured and killed by drunk drivers. The cost of labor for police officers and medical workers that are needed to work the road blocks as well. The tax payer and the government have to cover this cost. Economists think that if they raise the price on alcoholic beverage and limit the amount to be then this would cut back the purchasing of alcoholic beverages and cut down on the cost. 2. Analyze how prescription drugs affect the demand and supply of other...
References: N. Gregory Mankiw’s Principles of Microeconomics, 2nd edition, Chapter 14
(p. 291-314) and Chapter 15 (p. 315-347
National Institute on Alcohol Abuse and Alcoholism, Apparent Per Capita Alcohol Consumption: National, State, and Regional Trends, 1977–97, Surveillance Report no. 51 (Washington: CSR Inc., 1999).
O 'Sullivan, A., Sheffrin, S., & Perez, S. (2012). Survey of economics: Principles, applications, and tools (5th ed.). Upper Saddle River, NJ: Pearson-Prentice Hall.
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