Assignment 1: Principles of Economics

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Assignment 1: Principles of Economics 1. Suggest how an economist would approach the problem of alcohol abuse. Provide two (2) possible solutions to this problem. Include the four (4) elements of the economic way of thinking in your analysis. The economic way of thinking is not very different from the American culture’s way of thinking as a whole. The textbook lists the first element of the economic way of thinking as using assumptions to simplify (Sullivan, pg. 7). In America we tend to simplify things until details are needed, this creates more efficiency in the day-to-day activities. An economist would not make an excuse when the problem at hand is a serious one with detrimental side effects. This is why an economist would assume the best of alcoholism to simplify the process of rectifying it. According to Cook & Moore, authors of the article, The Economics Of Alcohol Abuse And Alcohol-Control Policies, in the journal Health Affairs, the way to fix alcoholism is to raise prices of beverages that contain alcohol because, ”consumers tend to drink less ethanol, and have fewer alcohol-related problems, when alcoholic beverage prices are increased or alcohol availability is restricted.” Another economic solution to fighting alcoholism would be to place tariffs on companies that are involved in the alcohol trade. By doing this, it becomes more expensive to complete business and thus liming supply of the end product. This would be more beneficial in the end in conjunction with raising excise taxes for the consumer; because the alcohol producers will forward the taxes on to the consumer, creating yet an even pricier drink for the consumer. 2. Analyze how prescription drugs affect the demand and supply of other products and services in this country. As prescription drugs are formulated, there are many millions of dollars that go into the final chemical

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