Hawaii’s Health and Human Services Committee implemented the highest tax increase in the nation on cigarettes at the University of Hawaii. The increase in the indirect tax changes the tax of cigarettes from $3.20 per pack to $4.50 per pack aimed to decrease the consumption of cigarettes. This article states that this raise in tax at “all 10 University of Hawaii campuses … is closer to becoming law.” This tax was first raised at the campus but could soon be applicable to the entire state.
These interventions were intended to improve the health of students by decreasing consumption of cigarettes. Cigarettes are a negative consumption externality because they cause spillover costs upon a third party as a result of consumption. Market failure …show more content…
The arrow shows the spillover costs and that the marginal propensity to consume is greater than the marginal social benefit. The tax would help correct his by increasing the MPC so that Qm moves to Q*; the optimum quantity is socially …show more content…
This tax could be successful in decreasing the consumption of cigarettes because the tax was implemented on a college campus which means that the PED is somewhat elastic. However, an unintended consequences of the tax was that the quantity demanded for e-cigarettes rose. This could be a negative consequence because some e-cigarettes are just as, if not more, dangerous as cigarettes. To avoid this unintended consequence, an alternative to an indirect tax on cigarettes is to raise the legal smoking age. This would be a more direct, decrease on the amount of young smokers. Another alternative to a tax would be to subsidize an alternative. The article states that because of the increase in tax per pack of cigarettes, the quantity demanded for e-cigarettes and vapes is increasing significantly. This suggests that cigarettes and e-cigarettes are substitute goods therefore they have a high
These interventions were intended to improve the health of students by decreasing consumption of cigarettes. Cigarettes are a negative consumption externality because they cause spillover costs upon a third party as a result of consumption. Market failure …show more content…
The arrow shows the spillover costs and that the marginal propensity to consume is greater than the marginal social benefit. The tax would help correct his by increasing the MPC so that Qm moves to Q*; the optimum quantity is socially …show more content…
This tax could be successful in decreasing the consumption of cigarettes because the tax was implemented on a college campus which means that the PED is somewhat elastic. However, an unintended consequences of the tax was that the quantity demanded for e-cigarettes rose. This could be a negative consequence because some e-cigarettes are just as, if not more, dangerous as cigarettes. To avoid this unintended consequence, an alternative to an indirect tax on cigarettes is to raise the legal smoking age. This would be a more direct, decrease on the amount of young smokers. Another alternative to a tax would be to subsidize an alternative. The article states that because of the increase in tax per pack of cigarettes, the quantity demanded for e-cigarettes and vapes is increasing significantly. This suggests that cigarettes and e-cigarettes are substitute goods therefore they have a high