June 2011 Econ1 AQA Context 2
Markets for Alcoholic Drinks in Scotland
Define the term ‘market mechanism’ (Extract E, line 2).
1) Market mechanism is how markets decide on the most efficient allocation of scare
resources. This is done by demand and supply determining the price and quantity of goods
and services and for it to work effectively it is assumed that consumers are omniscient,
rational and utility maximising, that firms are competitive and profit maximising and that
factor suppliers are income maximising.
Identify two significant points of comparison between the alcohol consumption of the
different age groups shown in Extract D.
2) One significant point of comparison between the alcohol consumption of the different
age groups shown in Extract D is that the highest percentage of light drinking drinkers is in
the 21-25 age group, where 68% are light drinkers. In comparison, the age group with the
lowest percentage of light drinkers is the ages 12-13 in which only 4% are light drinkers.
A second significant point of comparison is that the percentage of each group which
consumed alcohol increased as age increased from the 12-13 age group until the 21-25 age
group from 4% to 68%. The percentage of drinkers then declined on the whole from the
age of 21-25 up to 65+ from 68% to 38%.
‘The Scottish Government also intends to advertise widely the health consequences of
drinking’ (Extract F, lines 10-11). With the help of an appropriate diagram, explain
why, if left to the market, too much alcohol is consumed.
3) If left to the market it is likely that too much alcohol will be consumed as the market
takes no account of externalities, defined as social costs and benefits which have 3rd party
effects as opposed to private costs and benefits. Alcohol is a demerit good (one where
consumption has negative externalities, such as antisocial behaviour to 3rd parties) and the
market will overproduce it as the market does not consider the detrimental impacts on
society of the consumption of alcohol
Markets for Alcoholic Drinks in Scotland
Define the term ‘market mechanism’ (Extract E, line 2).
1) Market mechanism is how markets decide on the most efficient allocation of scare
resources. This is done by demand and supply determining the price and quantity of goods
and services and for it to work effectively it is assumed that consumers are omniscient,
rational and utility maximising, that firms are competitive and profit maximising and that
factor suppliers are income maximising.
Identify two significant points of comparison between the alcohol consumption of the
different age groups shown in Extract D.
2) One significant point of comparison between the alcohol consumption of the different
age groups shown in Extract D is that the highest percentage of light drinking drinkers is in
the 21-25 age group, where 68% are light drinkers. In comparison, the age group with the
lowest percentage of light drinkers is the ages 12-13 in which only 4% are light drinkers.
A second significant point of comparison is that the percentage of each group which
consumed alcohol increased as age increased from the 12-13 age group until the 21-25 age
group from 4% to 68%. The percentage of drinkers then declined on the whole from the
age of 21-25 up to 65+ from 68% to 38%.
‘The Scottish Government also intends to advertise widely the health consequences of
drinking’ (Extract F, lines 10-11). With the help of an appropriate diagram, explain
why, if left to the market, too much alcohol is consumed.
3) If left to the market it is likely that too much alcohol will be consumed as the market
takes no account of externalities, defined as social costs and benefits which have 3rd party
effects as opposed to private costs and benefits. Alcohol is a demerit good (one where
consumption has negative externalities, such as antisocial behaviour to 3rd parties) and the
market will overproduce it as the market does not consider the detrimental impacts on
society of the consumption of alcohol
