“Real ale is the only type of beer now seeing its sales grown in the UK pubs, helped by an increasing number of women enjoying the drink, a study has said. While all other beer types, such as lager and keg bitters, saw their sales fall in the first half of 2009, sales of real ale grew 1%, it said. The independent study, which is backed by a host of brewers, said the number of women drinking real ale has doubled. The increase in real ale sales might come as a lifetime opportunity for pub-owners. Most pubs are currently facing harsh times (as a result of the recession) and more pubs are going out of business every day. The sale of real ales could be a turning point for them.”
b. link to the article
http://news.bbc.co.uk/1/hi/business/8290264.stm
c. list the determinants of demand and the determinants of supply
The determinants of demand are: disposable income, taste & preferences, the prices of substitutes and complements, expectations of the future and, finally, population.
The determinants of supply are: technology, factor prices, the number of suppliers, expectations of the future and, finally, environmental conditions.
d. draw the demand curve for real ale
(The demand is rather steep as the demand is quite inelastic.)e. explain whether the demand for real ale is elastic or inelastic
The demand for real ale is inelastic, as the recession did not affect the demand for real ales in a negative way.
f. explain why the demand for real ale has increased
The article describes that woman prefer to drink real ale above other beers. This is a question of taste (one of the determinants of demand). Because the amount of women drinking in pubs has increased, the demand for real ales has increased as well.
g. explain - with diagrams - whether binge drinking is a positive or negative externality
I think binge drinking is a positive externality, as alcohol brings people together. When someone is under influence of alcohol (read: extremely drunk), he or she has contact with other people very easily, as the alcohol takes away any form of hesitation or shyness. This causes people to broaden their social network. This would mean more and more people will become good friends. This would not only improve transfers on the job market, as people find new jobs because of their new friends. For example: person A says: “Oh man I got fired, I really need to find a job!”. Person B (a friend of person A which he met when he was really drunk as a result of binge drinking) says: “Oh man I know that my mate (Person C, also met as a result of binge drinking) is looking for someone to work in his shop!”. It also increases productivity of the employees. Someone might not be willing to do that extra work for his ‘boss’, but he might just be willing to do it for his ‘friend’ (his boss who became his friend as a result of binge drinking). You can conclude that binge drinking is a positive externality. This is because binge drinking causes some good social advantages (new friends and a loose atmosphere) which will result into lower unemployment and bigger output! In a diagram this would be shown as following:
MPC = Marginal Private Costs = The person putting effort, time and money into getting drunk.
MPB = Marginal Private Benefit = The person having a good time from binge drinking!
MSB = Marginal Social Benefit = The benefits to society and the economy from binge drinking: better productivity & faster transfers on the job market.
Green area = Profit.
P1/Q1 = Social Optimum
P/Q = Market Outcome
h. advise on government policy in the light of your answer to (g)
The government should encourage binge drinking by decreasing the taxes on alcohol and by giving subsidies to people who take part in binge drinking. The government could also stimulate binge drinking by having campaigns in order to promote it!
One for the road is better left to the passenger
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