The Minimum-Alcohol-Pricing In Scotland: Article Analysis
This article is about the “Minimum-Alcohol-Pricing … in Scotland”. I will evaluate the article using demand and supply, elasticity and a price-floor diagram and its effects.
The objective of this price-floor is to reduce quantity traded this good, improving the health of its consumers.
The diagram indicates the winners in the short term are producers of substitutes for Tesco-Whisky unaffected by the minimum-price because it shows the quantity demanded for whisky fall due to an increase in price. These substitutes comprise of other whisky and narcotics.
Luxury whisky producers benefit because they now have a comparatively ‘better’ price; the minimum-price, indicated in the diagram (movement 0.36-->0.5), means the product is no longer sold …show more content…
At the market equilibrium, the revenue of the producers is the area of the rectangle (0.36-0-Qe), and the minimum-price decreased the total revenue to (0.5-0-Qd). This loss of revenue is completely accounted for by the producers, making them the biggest losers. The producers envisage another cost - the excess supply shown in the diagram. Because they are producing at ‘Qs’, and are receiving the revenue at Qd, they lose revenue from the minimum-price but pay to supply something that won’t be sold. In the long term, this cost is erased because Tesco stops producing whisky, realising it is economically unsound.
The diagram shows those who were unwilling to produce at a lower given quantity are removed from the market as quantity traded falls, illustrated by the change in producer surplus. This causes the yellow part of the deadweight loss, meaning the remaining producers must be efficient, otherwise they wouldn’t be willing to produce at a lower …show more content…
The article mentions: “The aim of MUP is to protect the young and the vulnerable, heavy drinker”. The diagram shows this as quantity demanded would fall for this demerit good, which is usually economically desirable. Also, it takes time for them to find a substitute - the price elasticity of demand for whisky becomes more elastic over time, potentially helping them kick their craving for whisky. These are advantageous in the long-term because their effects on health will only be noticed in that time period. The diagram shows this scheme reduces the consumer surplus, meaning that the majority of consumers are paying closer to what they are willing to. Thus it indicates that they receive less utility from alcohol, implying they are less addicted or consuming less, improving their health further. The fall in consumer surplus causes the green deadweight loss, because less is being consumed. The combined deadweight losses mean there is market inefficiency, as the price is not at the equilibrium, and the economy is therefore hurt.
The article estimates that “introducing a 50p minimum-unit price would result in 60 fewer deaths, 1,300 fewer hospital admissions and 3,500 fewer crimes within the first year.” This also shows this price-ceiling would benefit health services; doctors, as well as health insurances, are able to focus resources on other patients. Policemen’s jobs will also be facilitated, because they
The objective of this price-floor is to reduce quantity traded this good, improving the health of its consumers.
The diagram indicates the winners in the short term are producers of substitutes for Tesco-Whisky unaffected by the minimum-price because it shows the quantity demanded for whisky fall due to an increase in price. These substitutes comprise of other whisky and narcotics.
Luxury whisky producers benefit because they now have a comparatively ‘better’ price; the minimum-price, indicated in the diagram (movement 0.36-->0.5), means the product is no longer sold …show more content…
At the market equilibrium, the revenue of the producers is the area of the rectangle (0.36-0-Qe), and the minimum-price decreased the total revenue to (0.5-0-Qd). This loss of revenue is completely accounted for by the producers, making them the biggest losers. The producers envisage another cost - the excess supply shown in the diagram. Because they are producing at ‘Qs’, and are receiving the revenue at Qd, they lose revenue from the minimum-price but pay to supply something that won’t be sold. In the long term, this cost is erased because Tesco stops producing whisky, realising it is economically unsound.
The diagram shows those who were unwilling to produce at a lower given quantity are removed from the market as quantity traded falls, illustrated by the change in producer surplus. This causes the yellow part of the deadweight loss, meaning the remaining producers must be efficient, otherwise they wouldn’t be willing to produce at a lower …show more content…
The article mentions: “The aim of MUP is to protect the young and the vulnerable, heavy drinker”. The diagram shows this as quantity demanded would fall for this demerit good, which is usually economically desirable. Also, it takes time for them to find a substitute - the price elasticity of demand for whisky becomes more elastic over time, potentially helping them kick their craving for whisky. These are advantageous in the long-term because their effects on health will only be noticed in that time period. The diagram shows this scheme reduces the consumer surplus, meaning that the majority of consumers are paying closer to what they are willing to. Thus it indicates that they receive less utility from alcohol, implying they are less addicted or consuming less, improving their health further. The fall in consumer surplus causes the green deadweight loss, because less is being consumed. The combined deadweight losses mean there is market inefficiency, as the price is not at the equilibrium, and the economy is therefore hurt.
The article estimates that “introducing a 50p minimum-unit price would result in 60 fewer deaths, 1,300 fewer hospital admissions and 3,500 fewer crimes within the first year.” This also shows this price-ceiling would benefit health services; doctors, as well as health insurances, are able to focus resources on other patients. Policemen’s jobs will also be facilitated, because they