Principles of Economics - Essay Example

There are economics variables and principals of solving the problem of alcohol abuse. First, by increasing the prices of alcohol, the authority will require that the goods will not be easily affordable, and it would require people to stop in order to afford it. The government would be required to accumulate tax on a product that is used in fermentation or to increase the tax of finished products. Increase in tax will force producers raise the prices of alcohol. Lastly, economist suggests that by limiting the place and time used in taking alcohol can minimize the cases of alcohol abuse.

Authorities in many countries have passed legislation that increases the time costs used in taking beverages. High costs licences are levied to those that require more time to develop their businesses and also restricting certain area by increasing the cost of doing business (Cook, 2002). Alcohol abuse can also be mitigated through packaging. The government through legislation can control the least amount of alcohol that can be packaged in a container. The aim of control is to minimize the affordability of beverages.

Large amount of alcohol would be more expensive than when packaged in smaller packets (Cook, 2002). Question 2 Prescription drugs are those drugs that require a prescription from a doctor before one can use them. This problem has affected the free flow of drugs, therefore, affects the supply and demand of other goods. Prescriptions drugs are taken with other goods. Example, doctors prescribe drugs and encourage meals that increase the health of patients to help them recover from their ailments.

Therefore, prescription drugs complement other product like food, fruits and beverages. Increased use of prescribed medication increases the demand for food, fruit and beverages and reduction of the same reduced the need of food, fruits and beverages (Anderton, 1977). Prescription drugs change the demand and supply of other drugs. Patient who would rather buy drugs over the counter do not do so when they seek medication from doctors. Therefore, increase in prescription drugs reduces the provision of other drugs in the market.

Prescription drugs increases the demand for medical service. Specialized medical doctors earn a lot when more patients seek their services. As more and more cases that need patient to seek medical attention, the demand for those services increases. However, decrease in the supply of prescription drugs has a negative impact on doctor’s services. Question 3 Elasticity is the sensitivity of supply and demand to changes in the affecting factors. Elasticity can also be defined as the degree of variation of demand when price change or the amount of change in supply when price changes.

Elasticity is a key factor to consider when there is a shift in supply because it determines the degree of a change in the quantity supplied. Elastic demand curve has little effect when there is a shift in the supply curve. Inelastic demand curve has a large magnitude on the shift in the supply curve (Stonebraker, 2013). On the other hand, elasticity of supply is a factor to consider in the shift of the demand curve because it elasticity help determine the extent of the quantity demanded in a given time.

A shift in the supply curve when is less when the demand curve is relatively elastic. Inelastic demand curve has a significant change in the quantity demanded in case of a shift in demand curve. The principal of elasticity of demand and supply in the shift of