Question: The UK government is contemplating introducing a minimum price for alcohol to reduce binge drinking and the consumption of alcohol in general. Suppose the following

The UK government is contemplating introducing a minimum price for alcohol to reduce binge drinking and the consumption of alcohol in general. Suppose the following diagram shows the alcohol market in the UK. The current price of alcohol is 23 pence per unit, and 8 units of alcohol are consumed each week. What happens in the market if the government sets a minimum price of 30 pence per unit of alcohol? Will there be an excess supply or an excess demand for alcohol if the government adopts this policy? Explain.

Price pence per unit 40 35 30 25 20 15 10 5 0 4 8 12 16 Quantity

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