Evaluate Possible Economic Policies

Topics: Drinking culture, Alcoholic beverage, Alcoholism Pages: 3 (1305 words) Published: December 11, 2014
Evaluate possible economic policies, other than increasing the age limit, that a government might use to reduce significantly the consumption of alcoholic drinks.

The market mechanism should allocate scarce resources to maximise consumer welfare. Alcohol is an example of a demerit good. A demerit good is one which is overprovided by the market mechanism. Apart from alcohol, drugs and prostitution are also examples of demerit goods. Consumption of these goods produces large negative externalities. Crime increases, health costs rise, valuable human economic resources are destroyed, and friends and relatives suffer distress. Moreover, individuals themselves suffer and are unable to stop consuming because demerit goods are often addictive. Therefore it can be argued that consumers of these goods are not the best judges of their own interests. As a result, governments intervene to correct this market failure. The government has tentatively proposed a minimum price for a unit of alcohol at 45p. A minimum price is mainly aimed at preventing the sale of very cheap alcohol by supermarkets. The hope is that a higher price will discourage binge drinking, improve health, and make people pay the true social cost of alcohol. Opponents argue it is unfair and a regressive price which will hurt the living standards of those on low income. It is recognised that the UK has a problem with binge drinking. Overconsumption of alcohol can lead to many social problems, such as increased crime, increased accidents. It contributes to a variety of health problems such as premature death, cirrhosis of the liver, heart disease, cancer, alcoholism, and mental problems. All this places costs on the NHS, which have to be borne by the tax payer. The UK’s alcohol problem is much worse than most European countries, like France. According to the ONS, in 2010/11, there was an 11 per cent increase on alcohol-related (hospital) admissions giving a total of 1,168,300 admissions. This is more than...
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