Price Control: Alcohol Research Paper

1 Introduction

Price control has a considerable impact on business activities, as well as consumption and demand in the market. The regulation of prices through price control leads to setting price floor which affects consistently the price level and, thus, influences customer behavior. In this regard, alcohol price control in Wales has become the major tool to regulate the alcohol market and alcohol consumption in Wales. Price control has both positive and negative effects on short-run and long-run perspectives because of the reduction of alcohol consumption which may also cause the decline of alcohol production. In this regard, Wales should consider other options as alternatives to price control. On the other hand, price control is quite effective method and Walsh policy makers should consider all options to regulate alcohol market and consumption. The introduction of price control helps to regulate the development of the target market, such as alcohol market. However, policy makers should be aware of both short-run and long-run effects of price control because, along with positive effects, price control can bring negative ones. Therefore, the authorities can use price control to set the price floor and influence the consumption of alcohol in Wales effectively but they should be aware of possible negative effects such measure can trigger.

2 Essence of price control and the price floor

2.1 What is price control and the price floor

Price control sets the price floor which establishes the minimal price for certain goods, such as alcohol (Case & Fair, 2010). The price floor forces sellers to set the minimum, floor price, which customers should pay to purchase their products. In case of alcohol, price control leads to the establishment of the price floor, below which sellers cannot sell alcohol to consumers. Therefore, price control and the price floor are closely intertwined and interdependent because the price control leads to the formation of the price floor, while the price floor leads to effects, which policy makers attempt to achieve by means of price control.

2.2 Price control and price floor’s regulatory effects

Price control and price floor regulate the supply and demand as well as the consumption of the goods, which price control is applied to (Case & Fair, 2010). Regulatory effects of price control and price floor depend on the extent to which price control is strong. In other words, the strict price control can lead to the establishment of stricter price floor for specific groups of products. For example, in case of alcohol, price control may affect some products only, such as beer or whiskey by means of setting the price control over alcohol drinks depending on their level of alcohol. Such control focus on specific products only and does not affect others. At the same time, regulators can introduce similar price control to all alcohol products as is the case of Wales. As a result, such price control will affect all products and establish the price floor for all alcohol products.

3 Effects of price control on alcohol market in Wales

3.1 Short-run effects

3.1.1 Short-run effects on consumers

Short-run effects of price control on consumers can be positive and meet goals policy makers pursue (Siaroff, 1999). For example, if policy makers set higher policy floor, then the consumption of alcohol is likely to drop in a short-run perspective because consumers consider whether to buy or not alcohol at higher price, while a consistent increase of price may even shock consumers that will lead to the substantial reduction of sale rates. As a result, the drop of sales will be driven by the drop of consumption. Consumers, being unable to afford alcohol at the high price will refuse from buying alcohol.

3.1.2 Short-run effects on producers

In a short-run perspective price control can trigger the downturn in the development of the alcohol market (Siaroff, 1999). The reason is the uncertainty of business in the future policy of the authorities and the response of consumers to the new price floor and new prices for alcohol. For example, policy makers can make price control stricter that will lead to the growth of alcohol prices and, therefore, alcohol sales may drop. Alternatively, regulates may keep the price floor stable and refuse from further stricter regulations that create conditions for stable development of the industry in a long-run perspective.

3.2 Long-run effects

3.2.1 Long-run effects on consumers

In a long-run perspective, consumers are likely to change their attitude to the price floor and they steadily may increase the cosnumpiton of alcohol as they grow accustomed to new prices and they do not shock them or discourage from buying alcohol anymore. This is why experts (Sowell, 2008) recommend policy makers to enhance price control with educational programs, promotion and public campaigns aiming at the reduction of alcohol consumption, change of the public attitude to alcohol and shift toward healthy lifestyle instead of alcohol consumption (Rolf, 2000). Therefore, price control can have a positive impact on customers in terms of the development of the target consumer behavior, if price control has strong back up policies which encourage and motivate consumers to behave in the target way (Rodrick, 2002). In case of alcohol consumption and price control in Wales such goal is the reduction of alcohol consumption.

3.2.2 Long-run effects on producers

In a long-run perspective price control and setting the price floor may be effective on the condition that price control remains stable for a long time (Sowell, 2008). In other words, if regulators change price control policies frequently, manufacturers of alcohol and distributors will be unable to develop a long-run business plan and strategy. Moreover, some manufacturers will just prefer to exit the market and shift to other markets with more stable regulatory policies. If manufacturers are uncertain in the future of their business, they are likely to exit the market.

Alternatively, if price control remains stable and regulatory policies are transparent and clear, producers and distributors of alcohol just adopt their marketing strategy to the specific business environment influenced by price control (Gomory, 2002). For example, manufacturers of alcohol and sellers can increase the price of alcohol and cut the production to maintain the same level of revenues and benefits as they used to have before the introduction of price control. In such a way, manufacturers can recover from a short-run downturn in their business development caused by price control and regain their position in the market to carry on growing.

4 Alternative control strategy (Alcohol sales restrictions: by age or time of sale)

4.1 Short-run effects

    4.1.1 Short-run effects on consumers

Alternative control strategies may involve the restriction of alcohol consumption by age or time of sales (Siaroff, 1999).By raising the minimal age for alcohol consumption, the authorities of Wales can prevent a large group of population from mass consumption of alcohol (Millward, Bryson, & Forth 2000). For example, raising the minimal age to 25 a large group of young customers, who are often the most active consumers of alcohol, the authorities will reduce the consumption of alcohol in Wales. However, this measure will bring positive effects in a short run only because eventually consumers will reach the minimum age and start consuming alcohol or they just surpass regulations and will consume alcohol.

As for time of sales regulations, they are also effective only to a certain extent. In fact, the limit of time sale of alcohol can hardly limit the consumption of alcohol consistently because, if consumers want to consume alcohol, they still can buy it beforehand. Therefore, even in a short run perspective this measure can bring little positive effects.

4.1.2 Short-run effects on producers

Short-run effects of limitations on the age and time of sales of alcohol may be positive but still they are questionable. Producers will likely to reduce the production because they will be unable to sell alcohol as long as they used to in case of the limitation of the time of alcohol sales (Siaroff, 1999). Consumers may just reduce buying as much alcohol as they used to in a short run, until they accustom to new limitations and start buying more alcohol to meet their actual needs in a long run.

The age limitation is unlikely to have considerable impact on producers because there is still a chance that alcohol will be sold, even though there is a risk of illegal ways of buying alcohol by consumers under the age limit. Therefore, the reduction of sales is unlikely to be so substantial as to force producers to cut their production of alcohol. In addition, producers may consider options of redirecting their products to new markets.

4.2 Long-run effects

    4.2.1 Long-run effects on consumers

In a long-run perspectives, consumers are likely to overcome limitations imposed by such regulatory measures as setting the minimum wage or time of sales. Consumers will just adapt to new conditions of sale of alcohol, while raising the minimum age of alcohol sale is unlikely to bring effects in a long run because consumers are likely to adapt to such regulations (Sowell, 2008). For example, consumers at the age of twenty-four are likely to obtain alcohol via their friends. Moreover such regulations are likely to cause the public dissatisfaction to the extent that they force policy makers to refuse from such regulations. As for time limitations, consumer will change their behavior in a long-run perspective, if consumers just change the time they buy alcohol and by as much alcohol as they really need.

4.2.2 Long-run effects on producers

Producers may suffer slightly from the limitation by age or time of sale, if such limitations bring changes in the consumer behavior (Sowell, 2008). However, such changes are likely to occur in a short run but such changes are unlikely to occur in a long run. This is why producers will not suffer much from such regulations in a long run perspective and they will not lead to the reduction of the production of alcohol.

5 Conclusion

Thus, price control that leads to the establishment of the price floor is the efficient way to reduce the consumption of alcohol in Wales. Alternative regulations are not likely to bring positive effects, especially in a long run. Instead, price control can be effective in both short run and long run, especially if policy makers conduct transparent, clear and predictable policies, which do not change in a long-run perspective. In such a way, consumers tend to change their lifestyle and refuse from excessive alcohol consumption, whereas producers change their marketing strategy to make their business profitable even after the reduction of production.

 

References:

Case, K. E. & Fair, R. C. (2010). Principles of Economics. New York: Random House.

Gomory, R.E. (2002).Globalization: Causes and Effects. New York: Touchstone.

Millward, N., A. Bryson, and J. Forth. (2000).All change at work? NewYork: Routledge.

Rodrick, D. (2002).Alternatives to Globalization. New York: New Publishers.

Rolf, K. (2000). World Economy: Past, Present, Future. London: Routledge

Siaroff, A. (1999). “Corporatism in 24 Industrial Democracies Meaning and Measurement.” European Journal of Political Research, 36(1), 175–205

Sowell, T. (2008). Applied Economics: Thinking Beyond Stage One. New York: Routledge, pp. 7–9, 112–113

 

The terms offer and acceptance. (2016, May 17). Retrieved from

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"The terms offer and acceptance." freeessays.club, 17 May 2016.

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freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]
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