Sub: Economics Topic: Micro Economics
Question:
Explanation of positive and negative externalities of cigarette industry.
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Cigarette smoking has a lot of negative consumption externalities.
How might campaigns about second hand smoke and the damage done
to children, co-workers, and so on affect altruism? How might that in turn
change the free market equilibrium consumption of cigarettes?
Solution:
How might campaigns about second hand smoke and the damage done to children, co-workers,
and so on affect altruism? How might that in turn change the free market equilibrium
consumption of cigarettes.
However, since cigarettes are price inelastic, the implementation of taxes may not be very
effective in controlling the problem and reducing smoking as an increase in price would not
have a great effect affecting the consumption of cigarettes. In this case the campaigns about
the adverse affects of second hand smoke or the damage to the children due to smoking in
public place will be effective.
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