TECO601: Principles of Economics - Report Writing Economics Assignment Help

Assignment Task:

Presentation Guidelines: 

1. Your assignment must be typed. Diagrams may be drawn manually. Ensure that you label all your diagrams clearly and correctly. 

2. Compile your assignment (cover sheet, answers to questions, figures) into one single pdf file, and then submit it via the ‘Assessments’-‘Assignments’ tool on Moodle. Please note that your assignment will be checked for plagiarism by Turnitin. A “Similarity Index” above 30% will not be accepted.

Questions: 

1. Using demand and supply for alcohol, explain why the market outcome may not be efficient. [Think about externalities. What are some of the external costs imposed on society from excessive alcohol consumption?] [20 marks] 

2. Explain how a well enforced price floor could affect the market for alcohol and how consumption could adjust to an efficient level. [You can assume that firms understand market demand and will only produce the amount demanded at the price floor.] 

3. Now suppose that instead of using the price floor to restrict consumption, the government decides to impose a tax on alcohol ($x on each unit of alcohol sold). a. Can such a tax achieve an efficient level of consumption? Explain. [15 marks] b. In light of your answer to part a, if you were advising the government, would you recommend implementing a price floor or tax to achieve the efficient level of consumption? [Hint: think about tax revenue.] [15 marks] 

4. Is the demand for alcohol elastic or inelastic? Explain. How are your answers to Question 2 and 3 affected by the price elasticity of demand? [15 marks] 

5. Suppose that changing climate increases the price of hops (input in the production of alcohol). How will this affect the market for alcohol? Assuming that the price floor or tax on alcohol sales is operating, what does the government need to do in order to maintain an efficient level of alcohol consumption?

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