Answer Happy

Minimum price on alcohol
Governments in Australia and around the world are considering
implementing a minimum price (aka price floor) on alcohol. Your
task is to use the Economic way of thinking learnt in class to
formally explain the effect of the minimum price. You will need to
consider the external effects (negative externalities) of alcohol
consumption, the price elasticity of demand, and taxation (an
alternative way of reducing alcohol production/consumption). To
simplify analysis, please assume that alcohol is a single
homogenous good. That is, do not differentiate between
different types of alcohol and packaging (wine, beer, casked wine,
spirits etc.).
Suppose that changing climate increases the price of
hops (an 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?