ECO100 Use of Tobacco Products

the year 1998 and 2015. Over 1 billion people smoke cigarettes globally, men account for 800 million which leaves the 200 million as women. In as much as smoking rates have declined in first world countries especially among men, tobacco consumption in third world and developing countries is on the rise.

When the demand for a cigarette is less elastic, and the government imposes a $3 tax on cigarettes, the $3 will shift the marginal cost curve s=mc upwards from s2 to s1. The price per packet will increase and the quantity demanded will decrease. The producers will incur the additional cost of $3 tax which they must pay to the government. When the demand for cigarettes is elastic, the tax burden on consumers will decrease while that of producers will increase since the quantity supplied will be sensitive to price.

Increase in cigarette tax will reduce the household income, as people will take more money to spend and buy a pack of cigarettes, and it will increase the revenue from both the buyers and producers due to the tax imposed. A decrease in cigarette tax will increase the disposable income, this is because people will earn more money. The revenue from buyers and sellers will decline.

The Austrian government wishes to reduce the rate of smoking due to the economic costs used in healthcare to treat tobacco users in case of a complication also there is productivity loss through lost working days while one is in the hospital. Some users die while there are so young and this leads to a loss of earnings. However, the decline in the tobacco industry will lead to government tax losses and unemployment to those people who used to work in the tobacco industry. A smoker as they age should stop smoking because the body becomes weak with age and prone to many health complications like lung diseases.

In 2012, Austrian government aimed to reduce the country’s smoking rate by enacting a plain cigarette packaging policy. This policy requires that all the branding that is colored logos and trademarks are removed. The packaging should also have health restrictions when one uses tobacco. These policies reduce the consumers’ tobacco demand.  Lastly to minimize the chances of the retail packaging is misleading buyers about the detrimental effects due to the usage of tobacco products (Clarke & Prentice 2012).

Clarke and Prentice concluded that the plain packaging has a quite small effect reducing the demand for smoking. Also, it is less likely to be active in older smokers because they will be resistant to the existing anti-smoking policy messages. The addictive nature of tobacco leads to the ineffectiveness of the plain packaging policy. People’s taste and preferences did not change after the plain packaging policy (Clarke & Prentice 2012).

Types of unemployment and their causes.

Structural unemployment is the mismatch between the skills that one has and the job available. There are two causes of this unemployment; technological advances , technology replaces human labour e.g robots and use of web-based advertising in newspaper industry, second, trade restrictions in a country, this forces many businesses to relocate leaving behind their employees (Wagner 2014).

A decrease in consumer demand for goods and services causes a decline in business revenue thus recession in the business phase leading to layoffs since there’s no cash to pay the employees. This is called cyclical unemployment.

When workers leave a job before finding a new one, it’s called frictional unemployment, whereashidden unemploymentis where people are unemployed but they are not considered when the government is compiling work statistics

Failure to use all the skills and education by the workers is referred to as underemployment and is divided into; visible which includes employees working less hours than is required and invisible which includes workers who work full time jobs but don’t utilize all the specialized skills (Layard, et al., 2005). 

Labour market outcome for younger people

 Most employers like youths aged 15 – 24 since they are fresh from school and thus aggressive thus hungry to make impact and therefore they exploit and underpay them.

The aggresiveness of the young people aged 15 – 24 years has increased their demand in the job market. Increase in the number of working-age migrants will shift the labour supply curve downwards from( so to s1), and the equilibrium wage rate will fall.

The hunger for education has led to the rise in the number of young people between ages 15 – 24 years preferring to work while they study thus triggering an increase in working part-time as opposed to working fulltime.. Unemployed youth rate in Austria has risen to 13.5% and underemployment to 18% over the last years. The rise of the young population in Austria has resulted to higher demand for jobs than the supply of the jobs (Bell & Blanch 2011).

 Overseas migration has also significantly increased over the past years, and this accounts for the increase in the number of young people in the labour market. India’s unemployment rate increased to 3.52 percent in 2017 from 3.51 in 2016. Globally, unemployment rate is at 30%, both the unemployment rate and underemployment rate in third world countries is between 4%-12% in developed countries (Layard, et al., 2005). 

The differences in the unemployment rate between India and Austria is because India has a large informal sector and agriculture plays a significant role in most of the European countries. Also, the India youth unemployment is higher than that of adults.

References

Davidson, S., & de Silva, A. (2018). Did Recent Tobacco Reforms Change the Cigarette Market? Economic Papers: A journal of applied economics and policy, 37(1), 55-74.

Bell, D. N., & Blanch flower, D. G. (2011). Young people and the Great Recession. Oxford Review of Economic Policy, 27(2), 241-267.

Wagner, B. (2014). Types of Unemployment. Montana Department Of Labour And Industry, Research And Analysis Bureau.

Clarke, H., & Prentice, D. (2012). Will plain packaging reduce cigarette consumption?. Economic Papers: A journal of applied economics and policy, 31(3), 303-317.

Layard, P. R. G., Layard, R., Nickell, S. J., & Jackman, R. (2005). Unemployment: macroeconomic performance and the labour market. Oxford University Press on Demand.