Friday 11 November 2011

A few questions

Evaluate possible economic policies other than increasing the age limit that a government might use to significantly reduce the consumption of alcoholic drinks
The government can do quite a few things to reduce the consumption of alcoholic drinks except increasing the age limit. Probably the policy that would have the biggest effect on the alcohol consumption would be putting a specific tax on the producers of alcohol. Although this has already been done in the UK and other countries, although the tax can be increased to reduce alcohol consumption. Another policy that the government could do is to start advertising and raising awareness of how alcohol harms the human body. A good idea would be to do something similar as was done with cigaretts, to put stickers on the bottles showing disgusting pictures and stating facts about alcohol consumption. The graph below shows how putting a specific tax on the producer would shift the price upwards causing the consumer surplus to be lower and decreasing the amount of alcohol sold.


Assess the view that the environmental problems caused by the disposal of rubbish can best be dealt with by market forces rather than by government intervention.


The environmental problems caused by the disposal of rubbish are basically negative externalities, and how to adjust negative externalities without government intervention. This is actually a hard thing to do since all things that come to my mind are government interventions like adding red tape. Although I did some research and found the Coase theorem. I am not quit sure how this works but the basically what I picked up from it was that when there are no transaction costs in trade the negative externalities be dealt with by the private sector. Im not quite sure how this works maybe someone could tell me in the comments?

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