BEA683 Economics for Managers: Group Assignment
Semester 2, 2018
Important Information/Instructions:
This is a group assignment and hence you must form a group consisting of 3 students to complete the assignment. It is your responsibility to find your own group partners. You should use the ‘Ask the Class’ tool on MyLO to look for partners.
Due Date/Time: Friday, the 14th of September 2018/2pm AEST.
(Note: Completed assignments must be delivered to external markers on the due date as specified above, therefore extensions will not be granted lightly.)
Total Marks: 20 marks
Weight: 15% of final marks
Length: up to 1400 words
Submission Procedures/Requirements:
1. Your assignment must be typed. Diagrams may be drawn manually. Ensure that you label all your diagrams clearly and correctly.
2. Compile your group assignment (cover sheet, answers to questions, figures) into one single pdf file, and then submit it via the ‘Assessments’-‘Assignments’ tool on MyLO. Please note that your assignment will be checked for plagiarism by Turnitin. A “Similarity Index” above 30% will not be accepted.
3. If your group is comprised of face-to-face students, you must also submit a hard copy to an assignment box (location to be announced).
4. Only one submission is required from each group.

BEA683: Group Assignment Cover Sheet
Details of Group Members
Student #1
Name: __________________________________________________________
ID Number: _______________________________________________________
Email address: _____________________________________________________
Student #2
Name: __________________________________________________________
ID Number: _______________________________________________________
Email address: _____________________________________________________
Student #3
Name: __________________________________________________________
ID Number: _______________________________________________________
Email address: _____________________________________________________
Workshop Group (To be completed by ONE Face-to-Face Student responsible for collecting the marked assignment):
Name: _____________________________________________________________
Day/Time: ____________________________________________________________
Name of Tutor: _____________________________________________________


Minimum price on alcohol
Governments in Australia and around the world are considering implementing a minimum price (aka price floor) on alcohol. Your task is to use the Economic way of thinking learnt in class to formally explain the effect of the minimum price. You will need to consider the external effects (negative externalities) of alcohol consumption, the price elasticity of demand, and taxation (an alternative way of reducing alcohol production/consumption). To simplify analysis, please assume that alcohol is a single homogenous good. That is, do not differentiate between different types of alcohol and packaging (wine, beer, casked wine, spirits etc.).
For background information read the following articles:
https://theconversation.com/minimum-price-on-alcohol-in-the-nt-will-likely-reduce-harm-92577
http://www.abc.net.au/news/2017-10-21/alcohol-floor-price-considered-tackle-abuse-wa/9071544
Questions:
1. Using demand and supply for alcohol, explain why the market outcome may not be efficient. [Think about externalities. What are some of the external costs imposed on society from excessive alcohol consumption?] [4 marks]
2. Explain how a well enforced price floor could affect the market for alcohol and how consumption could adjust to an efficient level. [You can assume that firms understand market demand and will only produce the amount demanded at the price floor.] [4 marks]
3. Now suppose that instead of using the price floor to restrict consumption, the government decides to impose a tax on alcohol ($x on each unit of alcohol sold).
a. Can such a tax achieve an efficient level of consumption? Explain. [3 marks]
b. In light of your answer to part a, if you were advising the government, would you recommend implementing a price floor or tax to achieve the efficient level of consumption? [Hint: think about tax revenue.] [2 marks]
4. Is the demand for alcohol elastic or inelastic? Explain. How are your answers to Question 2 and 3 affected by the price elasticity of demand? [4 marks]
5. Suppose that changing climate increases the price of hops (an input in the production of alcohol). How will this affect the market for alcohol? Assuming that the price floor or tax on alcohol sales is operating, what does the government need to do in order to maintain an efficient level of alcohol consumption? [3 marks]