Market for alcoholic drinks

Section B data response

Q26: Markets for Alcoholic Drinks

Define the term ‘demerit good’.

A ‘demerit good’ is a good or service, of which consumption causes negative, affects on the consumer themselves. An example of a demerit good is alcohol. Due to the effect these goods or services cause, the government often imposes heavy taxes on the product to persuade people not to use them. Often a ban is imposed to help this, for example smoking in public places was banned by the Government in 2007.

Using Extract A identify two points of comparison between the prices charged for alcoholic drinks by different retail outlets in London in March 2008.

From Extract A, we can see the price of a pint of beer, glass of wine and measure of spirit; all vary in price from different retail outlets. In a public house in central London, it costs almost 3 times more to have a pint of beer than in a supermarket which would only cost you around £1.20. From the table we can see on average buying alcohol from an off-licence would cost you only a few pence more than in a supermarket. The most expensive place therefore to buy your alcohol from would be the public houses, costing around £2.50 a drink. It is more expensive to go to a pub in London than somewhere further up North. The reason it’s very expensive to drink in a pub because you, as a consumer, are paying for the overheads. The pub provides a venue, cool beer, atmosphere, lighting, heating and has to pay the brewery. So in effect buying cheaper alcohol from a supermarket misses out the ‘middle man’ and is almost 3 times cheaper. However, this can lead to negative effects such as alcoholism, purely because it’s so cheap to drink.