Economic Analysis

Principles of Economics

Answer 1)

Economist considers human beings as a rational agents and alcohol abuse solution is completely associated with benefit and cost. The impact if this cost and benefit might increase the cost or reduce the benefit. The easily drug accessibility, social acceptance in terms of money are also concern with the cost and benefit.

The solution to this problem given by economist is increase in the drug cost. In order to achieve this, enhancement in taxation and reduction in the major drugs availability as they are more linked with the alcohol abuse. The following are the components which economist thinks are the best approach towards the problem of alcohol abuse:

Cost enhancement:

There should be a greater tax on alcohol products

Prohibition of drug consumption in public places

Implementation of Laws on the alcohol purchase

Reduction in cost of Treatment

Grants by Government on social workers and AA firms

Accessibility action and knowledge through assistance of advertising and other campaign

The four (4) elements of the economic way of thinking in the analysis above are as followed (Frank, 2011):

The utilization of assumption to make simpler

Isolate Variables i.e. Ceteris Paribus

Think at the Margin

Rational People Respond to Incentives

Answer 2)

There is positive relation between the drug prescription and overall drugs counter. When supply of the prescribed drug is much heading to the user than demand will drop-off above the counter drugs. This result of the fix nature that faced by the drugs prescription. Therefore, the fall in drugs prescription supply heading to the users would eventually enhance the counter drug demand.

Moreover, recommended drugs prices are usually higher and users address herbal remedies. The demands for complementary products are not so much self sufficient comparing to each other which is consider to be expensive prescribed drugs and hence the demand will reduce as the same ingredients product available at much cheaper amount in the market. The price of herbal products can affect the demand of prescribed drug.

In situations when herbal remedy proved to be more effective than the prescribed counterpart, the usage demand of herbal will increase. In cases where there is no such herbal product available which can cure the disease, than the demand for further unessential miscellaneous goods are useless (Marshall A., 2012).

Answer 3)

A reason why the elasticity of demand is important consideration when analyzing the impact of a shift in supple is because of the tax occurrence that changes the base of supply as well as the elasticity of demand. The elasticity of demand i.e. the price elasticity of demand measures the product sensitivity or responsiveness to a change in its price. Furthermore, Price elasticity of demand is the ratio of the relative change in the number of the desired good, the relative change in the price, expressed as a ratio of the price elasticity of demand.

In inelastic demand, the tax paid by the consumer is more than the elastic demand whereas, the supplier has to be paid more when there is inelastic ...