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4.1.8.9 Government Intervention - Minimum Prices (AQA A-Level Economics Teaching PowerPoint)

Level:
A-Level
Board:
AQA

Last updated 2 Nov 2023

This AQA Economics teaching powerpoint covers aspects of Government Intervention - Minimum Prices

A minimum price, also known as a price floor, is a government-imposed minimum price for a good or service. Here's how it works:

  • When a government sets a minimum price above the market price, it creates a surplus, or excess supply, of the good.
  • This means that producers are unable to sell all of their goods at the minimum price, leading to reduced production and potential unemployment.
  • Minimum prices can also lead to lower consumer welfare, as consumers have to pay higher prices for the good.
  • Proponents argue that minimum prices can help support producers and ensure a fair price for their products, while critics argue that they can distort market signals and lead to inefficient resource allocation.

Minimum price for alcohol in Scotland

In Scotland, the government introduced a minimum price for alcohol in 2018 to address public health concerns related to excessive alcohol consumption. The rationale was that a minimum price would reduce consumption by making alcohol less affordable, especially for younger and more vulnerable people who are more price-sensitive. The idea is that a higher price would discourage binge drinking and reduce alcohol-related harm, such as alcohol-related diseases, accidents, and crime. The Scottish government also hoped that the policy would have a positive impact on healthcare costs and social services associated with alcohol-related issues. However, there has been debate about the effectiveness of the policy, with some arguing that it has not significantly reduced alcohol consumption or related harm, and that it may have unintended negative consequences such as increased prices for responsible drinkers.

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