Price floor- norway minimum price on alcohol

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6 Terms

1
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purpose

  1. to reduce excessive alcohol consumption 2. government sets a legally high minimum price on wine 3. prevents cheap alcohol and protects population health

2
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effects

  1. high price, lower quantity demanded. 2. may reduce heavy drinking and related healthcare costs. 3. creates incentive for black market or cross border shopping (people going to Sweden)

3
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stakeholders

consumers- worse off. producers- mixed, domestic producers are protected from cheap imports, face stable, regulated demand because Vinmonopolet is the sole purchaser. government- gains lower social costs (health, crime), loses revenue when people buy abroad.

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evaluation

1.effective for reducing consumption of inelastic goods like alcohol 2. can lead to unintended consequences (illegal markets) 3. works best with awareness campaigns + taxes.

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Vinmonopolet

is a goverment owned monopoly that sells wine and spirits in Norway.

6
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why it is a price ceiling

  1. alcohol price kept high. 2. free market competition would make price lower, government does not allow cheaper alcohol