The UK government is contemplating introducing a minimum price for alcohol to re

Question

The UK government is contemplating introducing a minimum price for alcohol to reduce binge drinking andthe consumption of alcohol in general. Suppose the following diagram shows the alcohol market in the UK. The current price of alcohol is 23 pence per unit, and 8 units of alcohol are consumed each week. What happens in the maket if the government sets a minimum price of 30 pence per unit of alcohol? Will there be an excess supply or an excess demand for alcohol if the government adopts this policy? Explain.

Explanation / Answer

Demand will decrease and supply will increase. So there will be excess supply than the excess demand as shown in the diagram. As the price increases, the demand curve shifts leftwards and supply curve shifts righwards.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.