Discuss three policies a government might use to reduce the consumption of a demerit
good such as cigarettes in detail.
Answers
Explanation:
The government may attempt to reduce the consumption of demerit goods such as cigarettes, alcohol and addictive drugs through persuasion; this is most likely to be achieved through negative advertising campaigns, which emphasise the dangers of drink-driving, drug abuse etc. The aim here is the opposite of normal commercial advertising, namely to shift the demand curve for demerit goods to the left.
A contraction of demand (movement along the demand curve for a demerit good) could be achieved by the imposition of a tax on the demerit good. This would have the effect of shifting the supply curve to the left, raising the price and reducing the amount consumed. If the government could accurately assess the value of the marginal external cost caused by the consumption of the demerit good e.g. in figure 1, it is the vertical distance XY, a tax equivalent to this could be imposed, and a socially optimum outcome could be achieved. However, in practice, ascribing an accurate monetary value to negative externalities is extremely difficult to do, and the demand for such goods as cigarettes and alcohol is often highly inelastic, so that any increase in price resulting from additional taxation causes a less than proportionate decrease in demand.
The government may use various forms of regulation. In its most extreme form, regulation could be used to impose a complete ban on a demerit good, such that its consumption is made illegal; for example, the Prohition Laws in the USA in the 1930s criminalised the sale and consumption of alcohol, as does the law at the moment in Saudi Arabia; also in the UK and many other countries today anyone found guilty of selling or consuming heroine can be imprisoned. However, the effect of such regulation is rarely to completely eliminate the market for the demerit good; rather, it is usually driven underground in the form of an unofficial or hidden market.
Less severe regulatory controls might take the form of spatial restrictions e.g. people may be disbarred from smoking in their place of work, on public transport and in cinemas and restaurants; there may be time restrictions in that it may be illegal to sell alcohol during certain periods of the day, or there may be age restrictions in terms of a minimum age being stipulated at which young people are permitted to buy cigarettes and alcohol.
This is ur answer dear..
I hope it will helpful for u ..
btw Gud Morning dear..❥