Assignment 1: Principles of Economics Due Week 4 and worth 200 points Write a three to four (3-4) page paper in which you: 1. Suggest how an economist would approach the problem of alcohol abuse....

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.
Alcohol consumption is a case of negative consumption externality. it harms those who do not drink-the family of the drinker suffers. At a macro level even the economy suffers due to loss of productivity, manpower, and medical expense spent on an alcohol user.
For an economist consumption must decline. This is possible by influencing demand or the supply of alcohol. The main idea is to use the law of demand- higher price discourages consumption. So 2 ways are:
· Influence demand and/or supply: To reduce demand the government can incentivize lower demand by systematic campaigns that coax lower consumption and educate the people about the negative effects of alcohol. Lower supply by banning the production of alcohol and restricting imports can work to reduce supply. This raises prices which can be expected to reduce consumption.
· Imposition of taxes is a direct way to increase the price. , and hope that consumption is lowered.
The 4 elements of economic principles include
1.
Use of assumptions. We use ceteris paribus which assumes that demand will be lower as price rises, keeping all other things constant. these include income, tastes, prices o other goods which must be unchanged for law of demand to work effectively. If incomes rise the demand may rise even though prices are higher. .  
2.
Opportunity cost-a consume
society will choose an option with highest opportunity cost. This cost is the alternative use of a person’s income/society’s resources. in this case the opportunity cost of resources that are wasted due to drinking are very high. So it makes sense to invest in ways and methods (like taxes)that reduce this consumption.
3.
Marginal analysis: the effect of a tax is worked out using the marginal principle. This tells us the effect of a unit rise in tax/price on demand levels.
4.
Rationality and role of incentives:  a rational consumer will weigh the utility derived from alcohol against the gains from giving up alcohol. If these gains ( in terms of better health and happier family life) can be made more valuable than the ‘pleasure’ of drinking we can expect rationality to lead to lower consumption.
2. Analyze how prescription drugs affect the demand and supply of other products and services in this country.
Prescribed drugs are one of the many goods produced and consumed in an economy, but they are more of an...