Over 60 dead in Indonesia from drinking bootleg alcohol
Discuss About The Opportunity Costs Of Alcohol Consumption.
I choose to do an analysis on the existence of alcoholic drinks since it’s a product mostly consumed in the market. Many people have abused the consumption of alcohol until others have become addicts such that they can’t go a day without an alcoholic drink. Its consumption has many negative impacts on the standards of living and is accompanied by health issues.
This paper will determine the opportunity costs of alcohol consumption; how choices are made since resources are scarce. This will be by the use of a production possibility frontier that will compare alcohol consumption and the consumption of another good. The paper shall also determine the demand and supply factors that contribute to the consumption of alcohol. We shall also see how prices and non-price factors cause movement along or shifting of the demand and supply curves. Lastly the paper shall cover the policies taken by the government to discourage its increased consumption.
Source: https://www.straitstimes.com/asia/se-asia/over-60-dead-in-indonesia-from-drinking-bootleg-alcohol.
Summary:
This news was published in the Straitstimes on April 8, 2018. The story behind this news is of people dying of consuming illegal alcohol; the incidence took place in West Java province. During this day, a container filled with illegal alcohol was removed from a house located in Cicalengka district. This illicit homemade alcohol had led to the death of 60 consumers whereas dozens of others were in hospitals. The raid showed that there are many suppliers of the illicit alcohol in Indonesia town. While some of the suspects were caught, others are still out there continuing with the supply.
Given that one need resources in order to consume alcohol, it falls in the consumers’ budget line which is affected by the scarcity of resources (Tejvan, 2016). The consumption of alcohol is thus at an opportunity cost of consuming other goods. Those with high levels of alcohol consumption leave little for the consumption of other home goods.
Fig: Production Possibility Frontier (PPF) of alcohol consumption
Given a fixed income level and all resources being employed such that the consumer is on the optimal point F*A*, the opportunity cost of consuming more alcohol for instance A1 is F*-F1 food. According to Riley (2015), PPF represent a tradeoff between consumptions. Given the incidence in this news, since alcohol prices are higher and the income is fixed, a further rise in prices cause the consumers to shift to cheaper alternatives which is the illicit homemade alcohol.
Analysis
Source: https://www.theguardian.com/business/2018/mar/07/coca-cola-launch-first-alcoholic-drink-japan
Summary:
In the past 132 years Coca cola has been in operation, it has never produced an alcoholic drink; this is the first time it is planning to do so. The new alcoholic drink is planned to be launched in Japan and is referred to as Chu-Hi Alcopop. According to Kollewe (2018), this canned sparkling flavored drinks is said to contain Soshu which is a local spirit. The news article also noted that the company will use this as just a starting point and may explore further opportunities.
Analysis
The news article notes that for the past five years there have been a surge in the sale of drinks with an alcohol concentration of between 3 – 8%; this represents an expansion in the supply for alcoholic drinks. The popularity of Chu-Hi alcopop will lead to the Coca cola Company expanding their production line to other types of alcoholic drinks. It’s also noted in the article that sugar tax is coming into effect next month, this is greatly going to impact the demand and supply of Coca cola products since price is one of the major determinants.
Fig: Demand and Supply of Alcoholic drinks
The demand for alcoholic drinks shown above is steeper due to its inelasticity to price changes. However, a higher tax will cause a larger rise in price from equilibrium price P* to P1 enough to induce a reduction in demand from equilibrium Q* to Q1. There will be an oversupply since suppliers need to supply more is affected by the reduced demand.
Source: https://theconversation.com/booze-and-basketball-why-binge-drinking-increases-during-march-madness-90038
Summary
There is high consumption of alcoholics drinks among the senior students at universities and colleges especially during March Madness tip-off. During basketball tournaments, the participant students have been noted to consume more beers than in the other days (White, Cowan & Wooten, 2018). This is also the case for football game matches. This is whether a team wins or losses; the winners may opt to celebrate the victory by binging more beers. On the other hand, the losers may opt to take some beers to relieve them the stress of losing.
Analysis
This new article is exhibiting the contribution of tournaments to the increased alcohol consumption among students. Since this increase in demand is induced by a non-price factor, it causes the equilibrium demand curve to shift. According to Dorman (2014), any non-price factor that induces demand causes the demand curve to shift.
Coca-Cola to launch its first alcoholic drink
Fig: Alcohol Market equilibrium
At the initial equilibrium point of P1Q1, demand is represented by demand curve D1. The non-price factor causes a shift of demand from D1 to D2. This shift causes an increase in both the quantity and the price level. The new equilibrium E2 is thus at a higher level than the initial equilibrium E1.
Source: https://theconversation.com/minimum-price-on-alcohol-in-the-nt-will-likely-reduce-harm-92577.
Summary
This new article published on March, 2018 gives an insight of the intention the government intend to make in order to lower the harmful effects attributed to alcohol consumption. The new alcoholic policy announcement was made in the Northern Territory and it has information on the implementation of a minimum pricing of alcohol. This is intended to raise the alcohol price by $1.30 for a standard drink (Livingston & Callinan, 2018). This alcoholic policy has never been employed in Australia before and this make NT the first state to bring such jurisdiction.
Fig: Minimum pricing of alcoholic drinks
The equilibrium before the policy of minimum price imposition is at point E where price is P* and quantity is Q*. The imposition of a minimum price is done above the equilibrium price at price Pm. at this new price, demand falls from Q* to Qm. an oversupply equal to Q1-Qm is created. The intended goal or discouraging consumption is achieved. This creates a need for illicit alcohol which is sold at price Pi; this explains why it’s always present in many economies.
Source: https://www.theguardian.com/lifeandstyle/2018/jan/26/fiona-beckett-low-alcohol-wines
Summary
There are many blend of alcoholic drinks in the world and consumers seek utility depending on the reason that cause them to indulge in the drinking; the occupation also determines the type of consumption. While some may refer consuming wines, spirits and other boozes with high alcoholic concentration, others prefer to use low-alcohol wines. The paper argues that drinking highly concentrated alcoholic drinks is harmful to one’s body and should be avoided (Straitstimes.com, 2018).
Fig: Consumer preference effect on demand for alcohol
According to Beckett (2018) most consumers especially women prefer low-alcoholic wines. The demand for these wines rises with the rise in consumer preference. Since consumer reference is a non-price factor, it will cause the demand curve D1 to shift to demand curve D2. Equilibrium point will shift from E1 to E2. The corresponding quantity to the new equilibrium is Q2 and price is P2. There are many alternatives for alcoholic drinks and thus the supply is adequate to meet the rising demand. There is a notion that technology for production of low-alcohol wine has improved and thus supply is going to rise
Conclusion
Alcoholic drinks give consumers utility that they can’t get from other drinks. Some of the consumers drinks constantly until they become binge drinkers. Alcohol will continues to be used despite the price increments. For binge drinkers, their standard of living will be greatly undermined by its consumption.
Due to an improvement in technology, there are better ways of producing alcoholic wines, thus, the supply of these alcoholic drinks is expected to rise in the future. However, unlike other goods, the increased supply will not cause the price to fall. Price will continue rising since increased alcohol consumption will bring negative health impacts that will create a need to raise prices to discourage its consumption.
I have learnt than the control of alcoholic consumption is not possible. The policies imposed by the government has less impacts since alcohol consumption is inelastic to price changes. Even if the policy worked, many consumers will shift their consumption to illicit homemade alcohol which has caused death to many and hospitalization of many others.
References
Beckett, F. (2018). How low can you go? Our pick of the best low-alcohol wines. The Guardian. Retrieved 25 April 2018, from https://www.theguardian.com/lifeandstyle/2018/jan/26/fiona-beckett-low-alcohol-wines.
Dorman, P. (2014). Macroeconomics. Berlin, Heidelberg: Springer Berlin Heidelberg.
Kollewe, J. (2018). Coca-Cola to launch its first alcoholic drink. The Guardian. Retrieved 25 April 2018, from https://www.theguardian.com/business/2018/mar/07/coca-cola-launch-first-alcoholic-drink-japan.
Livingston, M., & Callinan, S. (2018). Minimum price on alcohol in the NT will likely reduce harm. The Conversation. Retrieved 25 April 2018, from https://theconversation.com/minimum-price-on-alcohol-in-the-nt-will-likely-reduce-harm-92577.
Riley, G. (2015). Production Possibility Frontier. tutor2u. Retrieved 25 April 2018, from https://www.tutor2u.net/economics/reference/production-possibility-frontier.
Straitstimes.com. (2018). Over 60 dead in Indonesia from drinking bootleg alcohol. The Straits Times. Retrieved 25 April 2018, from https://www.straitstimes.com/asia/se-asia/over-60-dead-in-indonesia-from-drinking-bootleg-alcohol.
Straitstimes.com. (2018). Alcohol guidelines in many countries may not be safe: Study. The Straits Times. Retrieved 25 April 2018, from https://www.straitstimes.com/world/europe/alcohol-guidelines-in-many-countries-may-not-be-safe-study.
Tejvan. (2016). Production Possibility Frontier. Economicshelp.org. Retrieved 25 April 2018, from https://www.economicshelp.org/microessays/ppf/.
White, D., Cowan, B., & Wooten, J. (2018). Booze and basketball: Why binge drinking increases during March Madness. The Conversation. Retrieved 25 April 2018, from https://theconversation.com/booze-and-basketball-why-binge-drinking-increases-during-march-madness-90038.
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