Economics commentary - China set to introduce new rules on smoking in public

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INTERNAL ASSESSEMENT

Commentary no. 1

ECONOMICS SL

Name: Abdelrahman Lofty Mosalam

Class: DP1

Session: May 2012

China set to introduce new rules on smoking in public

China's economy is known as one of the strongest economies in the world, as they achieved a very high recorded rate of growth domestic product in 2010 with 10.3%, as well as china is one of the main exporters worldwide, all of these are reasons why China has a powerful role in the world economy. But unfortunately this power could be in dangerous if the economy faces market failure. Market failure occurs when there is a misallocation of resources according to the price mechanism towards the social optimal way caused by the failure of the market signal function to identify the efficient and exact outcomes (Mankiw, 2011). Which consequence externalities, In our market failure case, there is something called negative externality, which means that the third party, who are neither the consumer nor the producer, they are the society, known as the marginal social (MSb/c). This good produced  is  harmfully  or damagingly affecting the society. Therefore there is misallocation of resources. Traditionally Government intervenes by adding to the basic price, taxes to lower the demand on the good which influences the social and private cost positively by lowering their quantities as shown in {figure A}.

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Concerning the article, the negative externality is present in china due to cigarettes supported by the fact that 1 out of 3 people is smoking, which is considered a negative pick rate, which surely affects the environment and the third party, as mentioned above. This fact, and the increase of cigarettes consumption, makes "The country's authorities believe smoking kills more than one million people every year and that figure is predicted to triple by 2030". This statement is a very dangerous signal for china, mentioning that Chinese future is unsafe concerning both socially and economically as well, because "Smoking is ...

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