Home Office Minister James Brokenshire has described the move as "an important first step" which will prevent around 7,000 crimes a year - 2,000 of them violent.
But the British Medical Association says it will make little difference.
A spokesman for Alcohol Concern said: "The new provision must be welcomed, as it will hopefully make some difference at the very extreme cheap end of the market favoured by street drinkers and the young.
"Unfortunately, the majority of problem drinkers will unlikely be affected - the approval to the scheme on behalf of the drinks industry probably indicates that they are not expecting a huge decrease in sales."
Campaigners would like to see a 50p-per-unit minimum - something researchers at Sheffield University have estimated would mean that after a decade there would be almost 3,000 fewer deaths every year and 41,000 fewer cases of chronic illness.
The government's measure will translate to about 21p per unit of beer and 28p per unit of spirits. The lowest possible price of a can of lager would range from 38p to 78p depending on its strength, but most drinks would be unaffected.
Loss leader
Opponents of a minimum unit price say it is unfair because it penalises all drinkers, not just those who cause or have problems.
Gavin Partington, of the Wine and Spirit Trade Association, told the BBC News website: "We always said that duty plus VAT was the least worst option. All the other pricing mechanisms have problems with them, mostly of legality.
"I know some opponents say it doesn't tackle enough alcohol products. That may be true, but what it does do is prevent anybody using alcohol as a loss leader which has happened in the past.
"That has to be a good thing for both the consumer and the trade. Nobody wants to see stuff at rock bottom prices."
ECA #3
The price of alcohol in England and Wales is set to increase in April of 2012. The government wants to place a price floor (a regulation making it illegal to change a price lower than a specified level, set above equilibrium to be effective) on alcohol as previously it was being sold for less than the tax paid on it. The law of demand states that, ceteris paribus, an increase in a product’s price will reduce the quantity of it demanded, and conversely for a decrease in price; however, since the price elasticity of demand (a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same) is dependent on the Determinant of Price Elasticity, namely, substitutability (the larger the number and/or closeness of a substitute good, the greater the elasticity), the quantity demanded ( the amount of a good or service that a consumer is willing and able to buy at each particular price during a given time period) for alcohol will be relatively unchanged as there are no substitutes for alcohol. This is shown in Diagram 1 below:
Diagram 1- Price Floor on Alcohol
The demand and supply of alcohol are represented by the curves D1 and S1. Due to the price floor put on alcohol at price PF, there is an increase in the price from Pe to PF. Since the Law of Supply states that producers will supply more of a good or service at higher prices and less of a good or service at lower prices, ceteris paribus, the quantity supplied (the amount of a good or service that producers are willing to offer at each particular price during a given time period) has increased from Qe to Qs. Since alcohol is a relatively inelastic good, there is only a slight decrease in the quantity demanded from Qe to Qd, therefore resulting in a surplus (when quantity supplied increases quantity demanded) of alcohol at the price of PF.
Due to a price floor on alcohol, stakeholders in the market will be affected. Low income consumers will demand less alcohol as they will no longer be able to afford the good at the set price. However, since alcohol is a good which consumers will continue to demand, regardless of its price since there are no substitutes, the effect on quantity demanded is very minimal. Since producers will continue to supply alcohol since there are no factors or determinants affecting their production, there will be a small surplus of alcohol as there are those low income consumers who can no longer afford to buy alcohol. On the other hand, middle and higher income households will continue to demand alcohol as most of them will still be able to afford it.
In the short run, since it is likely that there will be a small surplus of alcohol at the price of PF, producers may slow down production. This is because the surplus at PF could be used as stock. Hence, producers will deplete their existing stock of inventory to meet their current demand. However, in the long run, if the government is able to strictly enforce the same price floor, then the producers may adjust their production to get rid of the surplus. Therefore, as a result, the supply curve may gradually shift to the left (decrease) to establish a new equilibrium at the floor price. In addition to this, the government may decide to closely monitor businesses and bars as well as re-enforce the penalties which may result if the price floor is not followed so that a Black Market (illegal trading arrangement in which buyers and sellers do business at a price that is lower (in the case of floors) than the legally imposed price) will not occur.