What externalities arise from smoking tobacco products and how do we deal with them?

Name: Problem 10, Chapter 17: Economics
Uploaded: 2020-10-20T05:19:24-08:00
Duration: 3 min 14 s
Channel: Kanishk Mishra
Description: What externalities arise from smoking tobacco products and how do we deal with them?

step 1 Hello students in this video we will be discussing about the externalities that would be arising

What externalities arise from smoking tobacco products and...

Key Concepts

Externalities

Externalities refer to the side effects of an economic activity that affect third parties who are not directly involved in the transaction. They can be either positive or negative, and when they are negative, such as with smoking, they impose unintended costs on society.

Negative Externalities

Negative externalities occur when the actions of individuals or firms impose uncompensated costs on others. In the context of smoking, these externalities include health costs from secondhand smoke and environmental damage, which are not reflected in the market prices of tobacco products.

Social Cost

Social cost is the total cost of an action including both the private cost incurred by the individual and the external cost imposed on society. With tobacco use, the social cost is higher than the private cost because it includes additional burdens on public health and the environment.

Internalizing Externalities

Internalizing externalities is a policy approach aiming to make the individual or firm responsible for the full cost of their actions, including any externalities. This can help align private incentives with social costs.

Pigouvian Taxes

Pigouvian taxes are levied on activities that generate negative externalities, such as smoking, to compensate for the external costs imposed on society. By increasing the cost of engaging in the harmful activity, these taxes help to reduce its prevalence and mitigate its negative impact.

Transcript

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