Alcoholic beverages have existed for more than 8000 years and although the World Health Organization states that global alcohol consumption has remained more or less the same since 1990, the main groups they drink are now drinking much more heavily. This is shown in the article, Alcohol Prices: Mulled Whines et al. (2013) where he explains how binge eating was once a rarity in Spain as alcoholic beverages were only consumed moderately with food. However, nowadays, during the night, many groups of people who have drunk excessively crowd into the Plaza de Espana in the center of Madrid, causing vomiting and disorder in the streets. Pitts (2010) explains that the social benefits associated with drinking alcoholic beverages include that it "produces a sense of relaxation, well-being and even euphoria in individuals, which enhances their enjoyment of whatever activity they are participating in", plus it can help relieve stress and make you more confident in your actions. However, alcohol also has social costs, as The Economist et al states. (2013) The demand for alcoholic beverages as a whole is inelastic, as can be demonstrated by the price elasticity of demand formula. Price elasticity of demand is explained by Hubbard et al. (2012) as “the responsiveness of quantity demanded to a change in price” and can be calculated with the following formula: Price elasticity of demand = percentage change in quantity demanded/percentage change in price. From statistics provided by The Economist et al. (2013) on how a 10% price increase would decrease consumption by about 5%, the equation would be: price elasticity of demand = -5%/10%, which means that the price elasticity of demand price would be -0.5. Due to the fact that the question... half of the card... name. However, there is a point where excessive alcohol consumption would have social costs to society, including disease and violence due to alcohol consumption. Since we also have private costs and benefits to alcohol (e.g. the ability to have more fun), we appear to consume too much of it, which creates a negative externality, as shown in the diagram below. When the supply line shifts towards S + external costs, we now see that the social equilibrium is at price Pf. If policy makers also set the price wall at Pf, then this shows that this is a socially optimal price , thus reducing the surplus or deadweight loss and actually also solves the social deadweight loss problem at the beginning. This lack of deadweight loss will lead policymakers to opt for this floor price instead of a tax where there is a deadweight loss, as discussed earlier in figure. 1.0.