Price+of+grog+to+rise+in+bars+and+restaurants+by+Caroline

=TITLE OF EXTRACT:=

Price of grog to rise in bars and restaurants

=SOURCE:=

http://www.stuff.co.nz/business/6449405/Price-of-grog-to-rise-in-bars-and-restaurants

=DATE EXTRACT WAS WRITTEN:=

February 20th, 2012

=DATE CURRENT EVENT WAS WRITTEN:=

Februrary 22nd, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:=

There has been an increase in price of production of a liquor which results in a decrease in the supply of the liquor itself. As a result of this, a new equilibrium point is formed at a higher price with less quantity consumed. There in an unavoidable relationship between price increase, supply, and demand. The article also mentioned that consumers are still being loyal to the products, meaning they are still buying in similar quantities as before, even with the increase in price, which would hint that the product, liquor, is an inelastic product.

=VOCABULARY TERMS AND DEFINITIONS:=


 * Factors of Production - Management (how the company is run), labor (manual/mental contributions to a company), land (the area of land used for production/offices/storage/etc.) and capital (any machinery which contributes to the production of the given product) and any increase/decrease in these will directly affect the supply of a product.
 * Supply - The quantity of a product producers can and are willing to produce at a given price.
 * Demand - The quantity of a product consumers can and are willing to use/consume/buy at a given price.
 * Inelastic - this is when the supply and demand for a product is unaffected when the price of the product changes.

=DIAGRAMS:=

=EVALUATION:= In this senario both parties (producers and consumers) may not be extremely happy with an increase in the factors of production but due to assumptions made about liquor being a relatively inelastic product, consumers are still buying the product at similar amounts, thus the company may in turn benefit from an increase in price even with a decrease in supply. In short run producers may be unhappy with a lesser quantity of liquor sold, but if they do gain a higher profit in long run they may be happy with the decrease in quantity. Another party who may benefit from the decrease in supply is the government because if there is a decrease of liquor consumed there may be less incidents in the country involving alcohol.