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Negative Externality Of Alcohol

802 Words4 Pages

Alcohol is the most widely used drug in the world. The term alcohol refers to the primary alcohol ethanol. In 2015 about 89% of adults in the United States stated that they had consumed alcohol in some point of their lives. Alcohol is a demerit good, because it can have negative effects on the consumer, but the effects of alcohol consumption can also impact other people and those spill over effects are called negative externalities. Negative externalities of alcohol consumption can be for example when a person injured by bad drinking habits needs medical or psychological treatment and their family has to pay for it. In Figure 1 you can see that the external cost, being the therapy the family has to pay, makes the curve for the marginal social …show more content…

In Figure 2 you can see that 40% of the highway fatalities involved alcohol and accounted for about 13,000 deaths is 2010. Here the marginal social cost would be the loss of a functioning vehicle and the payments to repair the property, which was damaged. The marginal social cost is higher than the private marginal cost and the socially efficient output is again lower than the output at market equilibrium. The free rider problem does not apply to alcohol consumption as a negative externality, because alcohol is not a public good. Free riders use public goods and do not pay for them. Alcohol is a private good, because you have to buy it in a store and if you took the last bottle of chardonnay the others can not buy anymore chardonnay, so it is excludable. Although you might think that there can be no social benefits of alcohol consumption there is one. Recent studies have shown that moderate alcohol consumption could be linked to improved wellbeing, because of the social interaction associated with having a drink with colleges or friends at a local bar. The alcohol appears to be releasing endorphins, which promote social bonding. But nevertheless consuming alcohol harms your body and consuming alcohol to have more fun is just an excuse to drink, because you can also have fun without drinking …show more content…

A difficulty, however, is monitoring how much it actually is.. If it is unclear how much negative externality is imposed on society it is difficult to say how high the taxes should be. Another problem, which could occur is that the black market could benefit from the high taxes on alcohol. Since such goods are not controlled by the government. The inferior alcohol, which is sold on the black market, can cause severe health issues. If it is not controlled it could contain methanol, which is toxic if you consume 0.1g per kilogram body

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