Every time I teach minimum prices I always talk about the minimum wage or the agricultural market but today I was delighted to find a new example which I will be using from now on. It has been suggested that alcohol should have a minimum price of 50p per unit, well above the current lowest price of alcohol which is currently around 9p per unit. By setting the price high, demand should reduce which in turn will hopefully slow the current trend of alcohol related deaths. Click read more for some questions on minimum prices.

1. Using a diagram to help you, explain the effect of a minimum price on alcohol. (4 marks)
2. Define excess supply (2 marks)
3. Using a diagram to help you, explain why the minimum price must be set above the equilibrium price. (4 marks)