Question

Tobacco smoking (1500 Word)

Tobacco smoking has long been established as a serious public health concern in Australia. The Australian government and health groups have used a multi-pronged strategy to reduce smoking rates over time. Discuss the economic rationale for these strategies and their likely impact on the consumption of tobacco products and subsequent health outcomes. In your answer, include the following:

a. The operation of an excise tax on tobacco product sales, using demand and supply curves to explore its impact.

b. The role of anti-smoking education campaigns to address potential market failure.

Criteria

Description of the issue

Identification of relevant economic theory

Use of analytic tools

Clearly written and addresses all aspects of the question and is well researched.

Answer 1

a. The operation of an excise tax on tobacco product sales. This strategy is often applied by governments the world over to reduce the consumption of tobacco by its people. Tobacco companies usually pass in this additional cost to its customers. There could be two outcomes of this action. The ones who are addicts and have te extra income would likely continue their consumption of tobacco. The ones who are not financially well-off are likely weigh the opportunity costs of tobacco consumption and subsequently reduce it. This leads to the fall in demand of tobacco.

Economically, it makes sense for the government because its revenue in terms of tax collected will go up. This will mainly come from the addicts. And the reduction in demand would mean that non-addicts are moving away from this habit.

b. The role of anti-smoking education campaigns.

This strategy is intended to target both addicts and non-addicts. It is aimed at making sure people are educated about the potential hazards of smoking and give it up altogether for a healthier lifestyle.

Economically, this strategy is better for the government. Whoever gives up smoking, is likely to have the money they used to spend on tobacco as extra disposable income. This money will now be spent on other economic activities. Gradually, this would lead to increase in output of the country.