Economic approaches to alcohol consumption and prescription drug abuse

¶ … Drug Abuse Economically

Alcohol consumption causes injuries, deaths and other problems in the society. In order to reduce the problem economists must understand it, and know the economic burden or effects it causes. Economists approach the problem using costs and further put it in real numbers. Economists use assumptions to simplify their work, and focus on what that really matters. They make rational decisions based on reason, and encourage them to act using that reason and not based on facts. They think at the margin while isolating variables; thus the notion that economists can be said to act rationally based on in their own interest.

Economic Approach

Different factors should be considered when looking at alcohol consumption. Economists should use statistics to know the rate of alcohol consumption, and the increasing alcohol consumption rates. Many people tend to believe alcohol myths, which are unrealistic and misleading. Believing and acting on such misleading statements will not help to solve the problem of reducing alcohol consumption. It is observed that most college students drink heavily, resultantly from alcohol advertisements that lead to increase alcohol consumption as witnessed in the last few decades. In addition, drinking by college students has increased due to peer influence. Economists should rely on such statistics in attempting to solve the problem of alcohol consumption. An economist should approach the problem by looking at social and drug control policies available and their effectiveness

Research shows that the society's approach towards alcohol is based on faulty assumptions, leading to faulty public policies that lead to the problems they intend to solve. Policy implementers and other institutions should not rely on economists thoughts to solve problems, but rely on research statistics. Legal ban on alcohol advertising can help in solving the problem, or implementation of policies which prevent alcohol abuse (unacceptable drinking of alcohol) (Korgen et al., 2008).

Importance of Elasticity of Demand

Quantity demanded is always portrayed as a decreasing function of the price. When prices increase, the more income is consumed, and the less people tend to purchase. Demand tends to be an addictive quantity, but there are choices. Public goods exist when consumption is mutually exclusive, and its impractical to exclude users from consuming the goods or services. The market demand is the number sum of consumers willing to pay for the fixed (inelastic) quantity of the good. The measure of responsiveness is always referred to as elasticity.

Increasing-Cost Industries

Increasing cost industries are industries where number of companies involved in that industry increases and the cost of production and resources increase, and the input prices rise. This results in a competitive industry having a long-run, positively- sloped supply curve. Examples of such industries are Hisoft Technology International Limited, and ITO (VanceInfo Technologies Inc.), Huawei, IBM Corp, Microsoft, Corp, Companies of China are excellent examples of increasing cost curves in the software industry. Cost curves of individual firms rise simultaneously with the increment in total output of the industry to meet their demand, while average also increases. Cost curves shift upwards with the industry expansion. On account of increased costs, long run supply of the industry slopes upwards. This leads to higher equilibrium price and the graph slopes upwards due to the increasing industry; curve also slopes upwards due to large production by the industry (FK).

Efficiency of a Competitive Market

Market conditions can be efficient or inefficient in the same depending on certain conditions. An economic system with complete market and perfect competition provides a competitive equilibrium which is Pareto optimal. Under certain conditions, the state of Pareto optimal can be achieved through redistribution of resources as an outcome of competitive equilibrium. Markets can only operate under perfect competition if certain conditions are in existent. In perfect competitive markets, there are no barriers of entry by producers or consumers, and there is no power over price. Consumers and producers have all information and make rational decisions to maximize utility and profits. Consumers bear all costs of consumption, and producers all the costs of production. This establishes a perfectly competitive market, where marginal costs and quantities reach a competitive equilibrium (Lipsey and Harbury, 1992).

Economic theories suggest that, conditions for perfect competition require that neither consumers nor producers control the market. If the consumer or producer controls the market, market failure is likely to be experienced. Monopoly is also a market condition, whereby there few competitors are present in the market. A few producers, therefore, control production and price of products. There are no substitutes for the products, hence consumers are compelled to purchase the product according to the producer. Barriers to entry are also another condition which prevents competitors from entering into the market for competition. Lack of monopolies causes inefficiency due to lack of competition. Resources are misallocated in monopolies hence the society bears more welfare and fewer benefits. Economic benefits in a competitive, market that would favor the consumers are allocated to the producers even though they have inefficient production. In monopoly, profit maximization is reached when MR and MC curve intersect.

Conclusion

Conclusively perfect market conditions never exist in real life because it will lead to non- innovative or homogeneous market, no entry barriers hence no improved productivity, available perfect information, no costs for transaction, it will make buyers rational, and there will be no increasing bank scales. Perfect competition will put production efficiency to long- run equilibrium. There will be no change in the size of the industry, no subnormal or supernormal profits will be earned, and total costs and average revenue will be equal. Therefore, the economy will be affected in terms of growth and may remain stagnant due to unchanging market; hence no improvement.