Drown your sorrows in alcohol

Alcohol drinking in Singapore is a common practice by teenagers and adults. People drink alcohol when they are happy for instance they are having a party and people drink when they are sad as the saying goes “Drown your sorrows in alcohol”. In addition, some people practically drink alcohol for practically no reasons at all because some of them treat it as alcohol as a commodity.

One negative externality of alcohol drinking is the result of drunk driving accidents which killed thousands of people all over the world and every year in Singapore, there are hundreds of cases of drunk driving accidents.

The private cost of this activity is the cost of the number of drinks one consumes. This amount is not definite because the alcohol consumption of every individual varies. Moreover, the amount of alcohol one drinks depends on many factors such as occasion, the situation one is in, the feelings one is facing and etc.

The more one drinks, the attention span of one will start to decrease. Thus, when one decides to drive home after drinking, the attention span one has while driving is reduced thus, increasing the tendency to cause accidents. These accidents are for example damaged in public property, injuring pedestrians or other drivers on the road.

Hence, the external cost is the cost of the accidents which is either damaged property costs or loss of lives. The cost of damaged property would be measurable but the cost of a life cannot be measured.

Thus, the social cost of drunk driving is the cost of the alcohol one consumes in addition to the damage or harm one does to the surroundings, property or loss of lives.

Let me explain what I have said in a simple example:

Private Marginal Cost (MC)

Mr. Z consumes 3 glasses of alcohol which the total cost is at $50. This $50 is the private marginal cost.

External Marginal Cost (MC)

Mr. Z caused damage in property which the total cost is $10,000. This $10,000 is the external marginal cost.

Social Marginal Cost (MC): Private Marginal Cost+ External Marginal Cost

In this case, the social marginal cost is $10,050 in consideration that there are no other costs.

However, this scenario does not always happen as there are other immeasurable costs included as well.

Done by:

Glenn M.D

Labels: externality

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