Governments in Australia and around the world are considering implementing a minimum price (aka price floor) on alcohol. Using the Economic way of thinking learnt in this unit to formally explain the effect of this policy. Consider the external effects of alcohol consumption, the price elasticity of demand, taxes on alcohol, and the possible unintended consequences of a higher price on alcohol. To simplify analysis, please assume that alcohol is a single homogenous good. That is, do not differentiate between different types of alcohol and packaging (wine, beer, casked wine, spirits etc.).

Question

Explain in words if the demand for alcohol is elastic or inelastic and the implications this has on the consumer and producers' tax burdens.