The government has recently shelved a proposal for a minimum unit price for alcohol. For the purpose of this assignment I will be examining the economic theories behind the decision such as demand, supply and elasticity. Along with this I will be discussing the likely economic effects that a minimum price on alcohol could have .
Firstly I should look at the elasticity of alcohol relative to a person's income shown in figure 1. From this diagram it is clear that alcohol consumption has increased by 5 litres in the period between 1960 and 2000. This is as in 1960 you find that the average price of alcohol, relative to their income would be approximately 220 units which leads to 6 litres of alcohol being consumed by the average person. This is in comparison to in 2000 when we see that the price of alcohol relative to income is now approximately 90 units, this decrease in price has lead to the litres of alcohol consumed by the average person rising to approximately 11 litres. This shows that the more alcohol a person is able to afford the more alcohol they will drink.
Figure 1: Alcohol consumption in relation to income. (Publication in Parliament 2010)
This suggests that a minimum pricing on alcohol would be successful in lowering health problems and tackling alcoholism. I am now going to look at the health costs that are associated with alcohol consumption. Alcoholism can lead to many problems such as high blood pressure, stroke, coronary heart disease and cirrhosis of the liver.
Figure 2 Cirrhosis of the liver in relation to alcohol consumption. (Publication in Parliament 2010)
From this graph there is a clear correlation between cases of cirrhosis and the amount of alcohol consumed within a country. Countries that tend to drink more have higher death rates from cirrhosis than those that drink less. It has been estimated in a home office impact report that alcohol cost the NHS £21 billion per year between 2009-2010. Alcohol is now one of the biggest risk factors for disease and death in the UK. This puts a strain on the NHS and is one of the reasons there is a "huge level of support from frontline workers including doctors" (The Guardian 2013).
Minimum unit pricing will affect both health and crime costs as "40p could mean 50,000 fewer crimes each year and 900 fewer alcohol-related deaths a year by the end of the decade"(A minimum price for alcohol? 2013). A minimum unit pricing policy may have an impact in alcohol related crimes, as 40% of crimes committed have been done son under the influence of alcohol.
"The NHS estimates that around 9% of men and 4% of women within the UK show signs of alcohol dependence".
Figure 3 price elasticity demand for alcoholics
Figure 3 shows that while the price of alcohol is high, there is still a fairly high demand for it. This means that alcoholics are inelastic with their alcohol purchasing and therefore a minimum price may not have...