Econ8069 Business Economics Lead To Assessment Answers

Answer:

Market for Beer

The other advanced country that is being compared with Australia is Germany. According to the Australian Bureau of Statistics and the the per capita consumption of beer is being considered for making comparisons and it has been seen that the beer consumption in Germany is much higher at 104.2 litres than that in Australia at 71.4 litres. The method of using a per capita approach for cross-country comparisons is better as it reflects a more precise image of the level of consumption prevailing in the overall economy as compared to other methods which results in providing lower consumption estimates which lead to disproportionate representation of various groups whose drinking rates are different than what has been reflected. However, due to the harmful nature of alcohol, the aggregate-level data can be a better method to capture the relationship, the changes and consequences in drinking patterns.

The fundamental difference in the consumption of beer between Australia and Germany is the drinking culture in the two countries. The Germans follow binge drinking whereas in Australia that is not the case. The data shows that the German beer drinking culture is far more predominant in comparison to Australia as Germany accounts for 104.2 liters of beer per capita as of 2016 while Australia accounts for 71.4 litres per capita. Germany has been famous for beer worldwide and was the first European nation to have introduced beer standards and quality control. Germany also celebrates the Oktoberfest beer festival which is a Bavarian culture. Australia is also a beer loving country but the fame is based on the love for beer and not the quality and major part of the beer consumption is done by the ocker Australian male who consumes 80% of the beer but they comprise of only 10% of the population (Howard, Gordon and Jones 2014).

The price elasticity of beer is very difficult to properly define in Australia. Some research suggests that the demand for beer is price inelastic while others found it to be elastic. However in comparison to other alcoholic drinks, beer has comparatively lower elasticity and low income elasticity (Room, et al. 2016). That is a change in the price of beer will not affect its demand as much as it will affect the demand for other alcoholic beverages but a change in the income of consumers will lead to a greater possibility in the change in the consumption demand of beer as compared to other alcoholic beverages (Zhao, et al. 2014).

Before the excise, tax by the government the beer market was at equilibrium as shown in figure 1 and the price and quantities were given by P and Q. The tax raised the price of beer due to which the quantity demanded fell to Q_d and the quantity supplied rose to Q_s as a result of this higher price. The difference between the old price P and the price after tax P_t is the tax amount, which would go to the government.

If the government wishes to reduce the rate of beer consumption it will ideally impose taxes on beer, which will lead to more revenue and lesser incidence of health issues as beer contains alcohol, which is injurious to health. On the contrary, the market for beer will have to pay the cost for this decision (Sharma, Vandenberg and Hollingsworth 2014). The beer prices will rise and in markets where the price elasticity of demand for beer is inelastic, the consumers will have to pay the cost of this decision of the government to reduce the rate of beer consumption. However, in markets where demand for beer is elastic will face an excess supply situation as consumers will no longer be willing to consume beer at the higher rates after tax.

Apart from the imposition of taxes, various measures have been taken up by the Australian government to reduce the consumption rate of beer (Treno, et al. 2014). A few strategies are:

• To make the communities aware of the health impacts of the consumption of alcohol and the adverse effects that consuming beer can have on their health.
• Devising strategies to protect individuals who are at high risk. This would entail the intervention of health professionals for guidance and remedy
• Prevention measures of the incidence of alcohol related harm to the youth
• Making stricter rules and regulatory initiatives which would keep the beer consumption under a check within the country
• Marketing the beer brands in a responsible manner, which would not lead to people to indulge more highly in its consumption. Measures should also be taken in regards to the provisioning of beer and pricing it accordingly
• Creating environments that are safe to drink beer and will not lead to misconduct
• Steps against drinking and driving as well as proper work force development

All these measures can only be implemented if the government has provided for proper research and evaluation measures to fully understand the causes and solutions to beer consumption so as to devise policies for reduction of the consumption of beer within the country.

Real wage is the inflation adjusted wages and this are represented in terms of the quantity of goods and services that can be bought by an individual at a specific time under ceteris paribus situation. It depicts a clear interpretation regarding the price of good and services that an individual can buy with his or her wage and in case of the rise in the purchasing power at a specific time under ceteris paribus situation, it can be said that real wage has been enhanced (Clark 2017). Factors that can alter the real wage scenario are inflation, price change of the goods and services and with fall in the same, it can be argued that real wage or the purchasing power of an individual has been enhanced. Thus, though real wage is a good indicator of growth in the real purchasing power, yet it has drawbacks too and real wage can depict the trend of the consumption of an economy too.

Australia and US, both are developed nations and indulged in international trading by a large extent, however, when it comes to the real wage, then two states faces difference. Australia can be acknowledged as the most expensive country among the G20 member nations and considering the consumer prices of goods and services, it can be seen that price in US market is 32.32% lower than US market (Moscarini and Postel 2017). On the other hand, it can also be seen that there were high growth in the real wage rate of the Australian employees compared to the US workers under the growth in the manufacturing sector of the state. Moreover, it can also be seen that there were higher amount of the fluctuation in the market of US under the rapidly growing competition with China that has reduced the incentive for the workers to work additionally. Thus, comparatively it can be seen that, Australian during the last one decade has faced higher and stable situation in case of its real wage.

Australia is one of the few nations that exercise minimum wage policies and as considering the same it can be seen that it has highest minimum wage for its workers. However, over the period it can be seen that Australian minimum wage policy has reduced the performance of the labour market due to the fall in the employment under enhanced price of holding an employee. As of now it can be seen that Australian minimum wage is $18.29 per hour or $694.90 for a week depicting a considerably high amount of cost for holding the labours (McKenzie 2018). This tends to increase at a 3.5% annual rate making the real wage of the state rise at a higher rate (Bishop 2018).

With rise in the minimum wage, there will be rise in the earning at individual level, however, during the past years, it has showcased moderate amount of fall in the rate of employment and in the participation rate as well. For the higher rate of wage, employees are eager to employ only skilled labours, which is less in number in Australia (Wilson 2017). It has further reduced the scope of employment in different sectors ranging from mining industry to manufacturing industry. Thus, if the minimum wage of the state is not revised with specific focus on the local scenario, then it will deteriorate the labour market situation further and cause a fall in the employment level further as well. Moreover, under the enhanced minimum wage, it can also be seen that, it will reduce participation rate that will sufficiently reduce the income of the individuals as well under the unemployment scenario.

References

Apparent Consumption of Alcohol, Australia, 2016-17. (2018). Retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/4307.0.55.001

Australia - OECD Data. (2018). Retrieved from https://data.oecd.org/australia.htm

Bishop, J., 2018. The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss (No. rdp2018-06). Reserve Bank of Australia.

Clark, G.L., Gertler, M.S. and Whiteman, J.E., 2017. Regional dynamics: studies in adjustment theory. Routledge.

Howard, S.J., Gordon, R. and Jones, S.C., 2014. Australian alcohol policy 2001–2013 and implications for public health. BMC Public Health, 14(1), p.848.

Jiang, H., Livingston, M., Room, R. and Callinan, S., 2016. Price elasticity of on-and off-premises demand for alcoholic drinks: A Tobit analysis. Drug and alcohol dependence, 163, pp.222-228.

Loretz, S. and Oberhofer, H., 2016. “When Helping the Small Hurts the Middle”: Beer Excise Duties and Market Concentration. In Brewing, Beer and Pubs (pp. 97-119). Palgrave Macmillan, London.

McKenzie, M., 2018. The erosion of minimum wage policy in Australia and labour's shrinking share of total income. Journal of Australian Political Economy, The, (81), p.52.

Moscarini, G. and Postel-Vinay, F., 2017. The Relative Power of Employment-to-Employment Reallocation and Unemployment Exits in Predicting Wage Growth. American Economic Review, 107(5), pp.364-68.

Sharma, A., Vandenberg, B. and Hollingsworth, B., 2014. Minimum pricing of alcohol versus volumetric taxation: which policy will reduce heavy consumption without adversely affecting light and moderate consumers?. PLoS One, 9(1), p.e80936.

Shrestha, V. and Markowitz, S., 2016. The Pass?Through of Beer Taxes to Prices: Evidence from State and Federal Tax Changes. Economic Inquiry, 54(4), pp.1946-1962.

Srivastava, P., McLaren, K.R., Wohlgenant, M., Zhao, X. and Campus, C., 2014. Econometric Modelling of Price Response by Alcohol Types to Inform Alcohol Tax Policies (No. 5/14). Monash University, Department of Econometrics and Business Statistics.

Treno, A.J., Marzell, M., Gruenewald, P.J. and Holder, H., 2014. A review of alcohol and other drug control policy research. Journal of Studies on Alcohol and Drugs, Supplement, (s17), pp.98-107.

Wilson, S., 2017. The Politics of ‘Minimum Wage’Welfare States: The Changing Significance of the Minimum Wage in the Liberal Welfare Regime. Social Policy & Administration, 51(2), pp.244-264.