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Write 6 pages with APA style on Uncorking a Strange Brew: The Need for More Competition in Ontarios Alcoholic Beverage Retailing System. BY: Paul Masson and Anindya Sen.
Write 6 pages with APA style on Uncorking a Strange Brew: The Need for More Competition in Ontarios Alcoholic Beverage Retailing System. BY: Paul Masson and Anindya Sen. By increasing the number of firms that produces beer in the retailing, there is higher production, and as result they will seek market avenues in other countries. This will make the economy to have a comparative advantage and increases its trade with other countries (Marshall, 2013). This will increase government revenue through foreign exchange that will enable the state to undertake other economic development in other sectors.
Production of the beer will be on large scale hence creating economies of scale. This translates into reduced average cost of producing beer in Ontario. This decreases market prices of beer and increasing the opportunity cost of consumption of the alcoholic drinks hence creating market efficiencies.
Increasing the number of firms will lead to increase competition in the market and there will be increased supply into the sell. This will increase quantity supplied in the market while the market demand is still constant (Marshall, 2013). Holding demand constant and due to excess supply, market prices are reduced as a result of the new market equilibrium. This can be illustrated as shown in the diagram below.
From the diagram P1 and Q1 represents the original market price and quantity respectively and intersection is the market equilibrium. D0D0 and S0S0 is the market demand and supply curve respectively. If competition is allowed by licensing other firms, production increases that shifts the supply curve from S0S0 to S1S1 while demand remains constant. This movement reduces prices from P1 to P2 and increases quantity from Q1 to Q2 and the new equilibrium as shown in the graph above. Hence consumers will benefit from the reduced prices as a result of more competition in the market.
Elasticity is the degree of responsiveness of quantity demanded as result of a unit change in price of the product.
