Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. The following graph shows the market for alcohol. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Price of Alcohol Quantity of Alcohol Supply Demand Demand Supply Market QOptimum + Deadweight Loss

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive.
The following graph shows the market for alcohol.
Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect
this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this
difference.
Price of Alcohol
Quantity of Alcohol
Supply
Demand
Demand
Supply
QMarket
QOptimum
+
+
+
Deadweight Loss
?
Transcribed Image Text:Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. The following graph shows the market for alcohol. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Price of Alcohol Quantity of Alcohol Supply Demand Demand Supply QMarket QOptimum + + + Deadweight Loss ?
Price of Alcohol
Quantity of Alcohol
Supply
Demand
Demand
Supply
A deadweight loss occurs because the social value of alcohol consumption
QMarket
QOptimum
Deadweight Loss
Use the black point (plus symbol) to indicate the market equilibrium level falls short of use the grey point (star symbol) to indicate the efficient
level of output in this case.
exceeds
Use the black triangle (plus symbols) to shade the area representing deadweight loss.
the social cost at the market equilibrium.
Transcribed Image Text:Price of Alcohol Quantity of Alcohol Supply Demand Demand Supply A deadweight loss occurs because the social value of alcohol consumption QMarket QOptimum Deadweight Loss Use the black point (plus symbol) to indicate the market equilibrium level falls short of use the grey point (star symbol) to indicate the efficient level of output in this case. exceeds Use the black triangle (plus symbols) to shade the area representing deadweight loss. the social cost at the market equilibrium.
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