Economist Approach to Alcohol Abuse
Alcohol is a psychoactive beverage and an integral part of human way of life. Its consumption at appropriate levels can result to euphoria and body relaxation, thereby consumed in a wide spectrum. Various reports show that its addiction and abuse is associated with significant negative effects to an individual and the entire economy. This includes the premature deaths, increased health complications, lost productivity and general damage to properties. These results require interventions and implementation of appropriate policies.
Economist’s perspective on consumer goods is likely to provide an insight regarding the consumption level. The approaches includes, the excise of relatively higher taxation rates on the product, this increases the relative price and reduces the demand. The economist price elasticity indicates that it is more responsive in the long-run.
Secondly, maintaining monopoly at the retail and wholesale levels. The retails controls off-premise while wholesale acts as exclusive on-premise consumption supply. Others are minimum advertising, promotion, and distribution. The results of these practices show clearly the inverse relationship between alcohol consumption and its relative negative effects. This makes them a greater economist’s intervention to alcohol modulation in the entire worlds economy (Boucher, et al 2006).
Results of Prescribed Drugs on Demand and Supply of Other Products
The socio-economic impact of prescription drugs on both demand and supply of various products has a great impact in the country. Survey reports indicate that increasing number of the Americans have consulted on medication upon observing a promotion of these drugs, this has promoted the services of the health care providers thereby increasing their demand. The demand for the pharmaceutical products utilized to manufacture these drugs has considerately increased. The positive trend of the citizen’s actively seeking healthcare has emerged. Other products such as the general infrastructure have relatively improved. This shows that the price elasticity of these products must be heterogeneous and follow the competition trend .
Importance of Elasticity of Demand and Supply
Price elasticity of demand is the responsiveness change of the quantity demanded due to price changes. It varies in different products such as, ostentation and inferior goods. Shift in supply to any absolute value always have an impact on the consumers capacity, this implies that a shift in supply destabilizes the equilibrium point as observed in the inelastic demand. The trend majorly occurs in agricultural products such as corn, wheat and rice. The elasticity of supply consequently has direct effect on the shift in demand. Economic adjustments can bring new equilibrium, as observed in the market of the consumer products such as foodstuffs (Rosenthal, 2003).
Increasing Cost Industries
As general rule, an increase in output production relatively results to direct increase in marginal cost of production. A typical situation experienced in the industries while approaching the economies of scale. The output increase usually results in prices elevation and the magnitude of efficiency of production. The interpretation of the industries whose units of production are less efficient reduces optimal, thereby making the average total cost curve to shift upwards in the long run. This challenges the rules of marginal revenue to be greater or equal to the marginal cost. Software engineering industry in the Silicon Valley and the mining industries in California are good examples (Correa, 2008).
Efficiency of Perfectly Competitive Market
Perfectly competitive market refers to relatively numerous small firms dealing in identical products with varied characteristics such as; homogeneity, free entry/exit in the market and perfect information on the product. A perfect example is the Cisco stock exchange where the shares are preciously identical with vast information online. It is the benchmark for judging other markets. Consequently, it ensures proper utility of resources.
The existence of the firm is always a decreasing cost that is merely theoretical and unrealistic. These firms incur zero economic profits thereby implying a positive profit, since it is capable of paying overhead expenses and earning opportunity cost, a normal wide rate of profit in accounting terms.
Perfect competition market always leads to a greater economic efficiency in the long-run as they produce at equal price and at the lowest average cost, thereby producing at the most affordable cost to the society.
The econometric approaches employed by the various stakeholders to counteract various issues discussed have various strengths and weaknesses. Despite these limitations, the variant approaches have greater positive values to intervene effectively on the concerns.
Ashly, M., & Ferrence, R. R. (1994). Moderate Drinking and Health . Report of an International Symposium, 809-824.
Ellen, E. B., Henrick, J. H., & Jeffrey, J. S. (2006). Economic Cost of Excessive Alcohol Consumption in USA. Preventive Medicine, 516-524.
Frank, J. C., Michael, G. K., & Saffer, H. (1997). The Econometric Analysis of Substance Use and Abuse: An Intergration of Econometrics and Behavioral Economic Research. University of Chicago Press.
Rosenthal, B. M., Ernst, R., Arnold, M. E., & Richard, G. F. (2003). Demand Effects of Recent changes in prescription Drug Promotion. MIT Press.