impact of the implementation of health tax on cigarettes on the consumers and producers.
Answers
Answer:
The main objective of the Health tax was to raise revenue collected by the government and discourage the high tobacco use among the consumers. Although the government is gaining the profit from the taxes, the consumers don't withdraw their addiction towards the tobacco use or rather get addicted to cheaper forms of tobacco such as beedi, jarda, khaini, pan etc.
This leads to a high risk among the tobacco consumers and makes them more vulnerable to be affected by diseases like throat cancer and lung cancer. So the government should either ban the tobacco products such as beedi which can be made avaiilable for a very low price or they should reduce the taxes they have already increased in order to make high quality tobacco available to people so that they won't go for the cheaper forms of the tobacco.
Explanation:
On Producer Side
When the government 'imposes a tax' on 'output of a firm', it increases the 'firm's marginal cost' by the 'amount of the tax'. In return, the firm will decrease the 'output' to the point at which the marginal cost plus the tax equals.
On Consumer Side
When the government increases the tax on goods, these taxes influence consumer behavior. When the 'price level of the goods' increases, the 'demand for goods' gets reduced because it reduces the 'buying power of the consumer'. So the consumer buys 'fewer products' with these prices.