Legislation is NOT the Best Way to Ban Smoking

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Legislation is NOT the Best Way to Ban Smoking

A market represents the private forces of demand and supply.
Consumers aim to consume goods and services with lower prices and greater quantities while producers want to maximize their profits. A market diagram uses demand and supply curves to show the relationship between market demand and supply. These demand and supply curves are labeled as “private demand” and “private supply”, that is, the private benefits and the private costs. But those private activities always affect others, both positively and negatively. Those positive and negative effects are not represented in the market model; they are external to the market, known as externalities[1].

There are two kinds of externalities: positive externalities and negative externalities. In the extract, cigarettes are negative externality, which means they have bad effects on others and those effects are not paid by the producers. For example, when people smoke, especially in public places, e.g. restaurants and department stores, they pollute the air rounded and threaten others’ health. No one pays for the bad feelings caused by smokers and cigarettes. In this way,
“market failure” exists. If the external costs could be measured and valued a new supply curve could be drown to present this.

In this figure, the social costs have been added to the private costs to produce a new supply curve. The private supply curve shifts to left. When the supply curve shifts from Smpc to Smsc, the market prices increase from pp to ps and the quantity traded is reduced from qp to qs.

Cigarettes are demerit goods which cause negative externalities.
Because of their characters, producers get huge profits from them. So they are overprovided in the market, just like alcohol. The consumption of cigarettes always has negative effects on other people.
It causes cancer, and may cut down human life-span.

In order to internalize the negative externalities, government should interfere in the market. There are several ways to do that. One method government may employ is negative advertising to reduce private demand for demerit goods.

People will consider the bad effects caused by demerit goods before purchasing or reduce the consumption on such goods that means private demand curve will shift to right.

On the other hand, the supply curve shifts to left because of the costs of bad effects added to the factor costs of the products. The transaction of that goods decreases. After government applying negative advertising to public, the total transaction will decrease again because demand decreases. According to the diagram above, the quantity transferred in the market drops from qp to qs first, and then, to qt. This method is very common nowadays, especially for

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