• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Utah House Passes $1 Cigarette Tax Hike

Extracts from this document...

Introduction

COMMENTARY COVERSHEET Economics commentary number: _______________________HL Number 1_______________ Title of Extract: _______Utah House Passes $1 Cigarette Tax Hike________ Source of extract: _______ CS News__________ Date of extract: _________Nov 29, 2010_________ Word count: ______651________ words Date the commentary was written: _________ Sections of the syllabus to which the commentary relates: _____Section 1________ Candidate name: _______________ Candidate number: _________________________ Utah House Passes $1 Cigarette Tax Hike March 08, 2010 - SALT LAKE CITY - A bill passed by the House here in a 19-8 vote would increase the state's cigarette $1, to total $1.695, The Associated Press reported. Supporting lawmakers have argued the tax increase would generate $43 million in the coming fiscal year. The bill now goes to Gov. Gary Herbert, who has said he's opposed to any increases, but hasn't voiced a veto threat to a tobacco tax hike, according to the report. Republican Rep. Paul Ray, who proposed the measure, said he's "comfortable" the governor will be on board. "He hasn't told me specifically he is," Ray said in the AP report. ...read more.

Middle

and SMB (Social Marginal Benefit). The private marginal costs is the price an individual has to pay to get one more unit of the product and the private marginal benefit is the profit the individual gets from one more unit. These costs and benefits often are very different from the social marginal cost, which is the cost the society pays for one ore unit of the good, and the social marginal benefit, which is the society's benefit from one more unit. This difference is the cause of market failure, because the market fails to account for the costs society has to bear and the benefits it can get from the goods. This is where the government has to step in. The government imposes taxes to reduce the bought amount of goods, which have negative externalities and subsidies, which are money paid to businesses to encourage production and consumption of goods with positive effects on society. The externality mentioned in this article is the negative externality of passive smoking. In a perfect market QS cigarettes would be sold at a price of PS. ...read more.

Conclusion

When a tax is imposed, this will effectively contract supply, because it will increase the price producers are willing to sell their goods at. The red rectangle represents the governments tax revenue. Due to the low PED of cigarettes, the price increases by a lot (from P to P2), while quantity sold barely changes (Q to Q2). This difference leads to a large consumer share of the tax, meaning that most the tax will be payed by the consumers rather than by the producers. The government uses this fact to increase their tax revenue, which is the total money the government earns from taxes. When they impose a tax on a good with inelastic demand, the revenue will increase. In the article it looks like the government assumes the cigarettes to be perfectly inelastic in demand, because it mentions that the revenue increase has never been as much as anticipated, because even though only few people stop smoking, there are still people who will stop smoking. This means that the government revenue is not increased by as much as expected, but also that there are less smokers, which counters the negative externality. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Effects of smoking on Society

    So smoking may help people with mental illness deal with stressful situations. (Rethink UK) This evidence shows the positive effects that tobacco smoking can have on society. The model below shows a positive externality market transaction. The Positive effects of cigarette smoking to society will cause the demand curve to shift to the right.

  2. 'Cigarette tax hike would benefit Tennessee residents' discuss.

    If food is assumed to be elastic, its responsiveness to price is high, then the demand for food will rise as shown in Figure 2. However because food is elastic, the incidence of tax will fall on the producers instead.

  1. Economics HL - IA

    A simple reason could be explained by a lower demand and thus a smaller amount of imports from Denmark and other countries. However, these higher levels of unemployment might be due to imports. As said, producers are worse off in an importing country.

  2. Alabama's Cigarette Tax Article. The basic economic problem in this article is negative externalities. ...

    Firstly, the government is placing partial ban on smoking. That is, making it illegal to smoke in certain areas, in this case restaurants, malls, etc. the hopes of politicians are by making it more difficult to smoke the demand for cigarettes will fall and so reduce smoking and secondary smoking.

  1. Market Failure IA Commentary. This article is about the price of cigarettes in Macao ...

    the full costs and benefits to society is where there is allocative efficiency. Allocative efficiency means that resources are being used to produce goods and services that are mostly wanted by society and demerit goods will not achieve that. In the article, there are two causes to market failure- the

  2. What is the impact of the Notional Interest Tax Deduction system on investments in ...

    This means that due to the NITDS the companies will not only produce at a lower cost but will also increase production. Due to an increase in national output, more people will be able to obtain the goods and thus those consumers that did not have access to the goods can now buy it at a lower price.

  1. Economics Commentary - Russian Quota on US Pork and Indian Government Tax on cars.

    In the article, the negative externalities which are occurring in New Delhi, India stem from traffic congestion and air pollution. Fig.1 below shows the external costs of using cars. As seen in Fig.1, consumers will enjoy some of the private benefits of car travel but there will be external costs in the form of air pollution and traffic congestion.

  2. The Benefits of Microcredit to Bangladesh

    (%) Very Small < 10,000 483 75.35 323 76.00 314 69.32 342 69.94 Small ? 10,000 but < 50,000 123 19.19 73 17.18 104 22.96 108 22.09 Medium ? 50,000 but < 100,000 20 3.12 16 3.76 18 3.97 21 4.29 Large ? 100,000 but < 1,000,000 12 1.87

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work