Very Good Case study to develop ANALYTICAL & APPLICATION SKILL. Solve it!!!
Alcohol and Government Policy
In the UK, the National Health Service often has to deal with the consequences of drinking alcohol. It is said that there is less trouble in other countries which have more relaxed licensing laws. In the UK, accidents caused by drinking alcohol result in 150 000 hospital admissions every year. Time taken dealing with these admissions prevents other treatment. There are about 22 000 deaths linked to alcohol-related illnesses every year.

There are also other consequences. Very many working days are lost each year because of
alcohol abuse which, it is estimated, cost the employers £6.4 million in lost production. There is also the cost of policing the city centres particularly at night and at weekends when excessive drinking causes riotous behaviour. It is argued that while police are controlling this behaviour it leaves property more vulnerable to burglary. Property owners, as a result, may have to pay extra insurance premiums and protect their property by paying for burglar alarms to be fitted. Then there are legal costs. If people are prosecuted for drink-related offences it involves court costs, lawyers’ costs and costs for the witnesses to attend court. There are also the costs of establishing centres that treat people who drink excessively and the costs of social workers who care for those who are victims of drink-related incidents.

One of the difficulties of trying to calculate the cost of alcohol use is how to estimate figures such as those above. How do we measure the cost of police time? How do we measure the costs of an emotional upset when someone is injured by a drink-related driving accident? How do we measure the effect of violence in the home caused by excessive drinking?

Yet there are benefits from alcohol. People gain pleasure from drinking: it is a social activity. Some alcohol is said to give health benefits. The government places a tax on alcohol and gains a large amount of revenue as a result. Many people are employed in the manufacture and distribution of drinks. Others are employed in clubs and bars that serve alcohol.

(a) (i) Define opportunity cost. [2]
(ii) Identify and explain one example of opportunity cost from the above extract. [2]
(b) You are asked to investigate the economic arguments for and against a ban on the sale and
consumption of alcohol. Discuss how helpful you would find the above extract and what
further information you would seek. [10]
(c) The government decides not to introduce a ban on alcohol. Instead it considers either raising
the existing indirect tax on alcohol or banning the advertising of alcohol. Discuss which of
these two approaches you would favour. [9]
[Total : 23]