MacDaddy_101
New member
First of all, i've been told to assume that all alcoholic beverages are illegal. Now suppose that only beer is legalized. Conduct a welfare analysis of the market for other alcoholic beverages. State the assumptions that you make.
Now im assuming that since beer becomes legalized, demand for other alcoholic beverages will drop, hence price will drop and so will quantity therefore reducing profit. Along with this, consumer surplus will increase, producer surplus will decrease and deadweight loss will also increase as the demand moves further and further away from market equilibrium.
So my question is, are these assumptions correct? And is there anything else i need to include or change? Thanks
Now im assuming that since beer becomes legalized, demand for other alcoholic beverages will drop, hence price will drop and so will quantity therefore reducing profit. Along with this, consumer surplus will increase, producer surplus will decrease and deadweight loss will also increase as the demand moves further and further away from market equilibrium.
So my question is, are these assumptions correct? And is there anything else i need to include or change? Thanks