Northern Territory to be first jurisdiction in Australia with minimum floor price on alcohol

The Northern Territory will become the first Australian jurisdiction to put a floor price on alcohol, the Government has announced.

On Tuesday morning, the NT Government unveiled its response to a wide-ranging alcohol review commissioned by former NT Supreme Court chief justice Trevor Riley, and said it would implement a minimum $1.30 floor price per standard drink for all alcoholic beverages. Source: ABC News, 28 February 2019

Answer all questions

1. Illustrate on a diagram, the effect of the price floor on alcohol (Assuming the price floor is binding).

2. On the diagram, show the effects consumer surplus, producer surplus and deadweight loss.

3. Is this an efficient outcome?

4. What is the motivation for this price floor?