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# Minimum Price | A-Level Economics Model Paragraph
- URL: https://www.a-level-economics-tutor.com/minimum-price-a-level-economics-model-paragraph/
- Published: 2026-08-09T15:03:04.000Z
- Updated: 2026-08-09T15:03:04.000Z
- Author: Jaisul Naik
- Tags: Model Paragraphs

### Minimum prices

One way to correct the market failure in the market for alcohol is through minimum prices. A minimum price is a price below which it is illegal to sell, and a minimum price should be set above the free-market equilibrium to have any effect on the market. There is a minimum price of 65p per unit in Scotland. The diagram shows that a minimum price causes a contraction in demand and an expansion in supply, and the price increases from P1 to P2\. As a result, there is a decrease in the amount of alcohol consumed, therefore a movement closer to the socially optimal level of output in the market.

However, minimum prices can cause government failure, especially in the form of unintended consequences. As mentioned, there is an expansion in supply, but a contraction in demand, creating a surplus of alcohol that remains unsold at the legal price. Producers are likely to be aware of this and may look to offload the surplus by selling below the minimum price through a black market, in order to maximise their revenues. A similar example is that some off-licences sell alcohol illegally after the 11pm cutoff — a similar logic could start to apply in terms of selling below the legal minimum price.

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