Consumers Association Of Penang And Cigarette Prices Economics Essay

The article is about consumers Association of Penang ( CAP ) that wants Government to enforce minimal monetary value on coffin nails that about RM30 per battalion. This is due to the low proposed monetary value of RM6.20 per battalion before. CAP besides wants authorities to efficaciously censor the sale of cheaper trade names in the market. This is due to the cheaper trade name coffin nails will do the consumers shift their purchasing of Prime Minister trade name which are more expensive to purchase the cheaper trade name and increase the demand for the coffin nails which really against CAP nonsubjective to discourage people from smoking. The articles besides about a few suggestions on how to forestall people from smoking which needs authorities to step in such as introduced licensing system that limits the figure and location of mercantile establishments allowed to sell tobacco merchandise. CAP besides suggests to raise the minimal legal age to purchase baccy merchandises from 18 to 21 to fit the legal vote age. The articles besides stated that the premium cigarettes that are sold in Malaysia are much cheaper compared to the other states. The value trade name coffin nails besides are easy available in topographic point that sell coffin nails and does non hold a warning on it. CAP besides wants authorities to take better enforcement to forestall these inexpensive coffin nails trade names from easy available every bit good as to forestall the smuggling of baccy merchandise from the other states. It besides suggest that there should hold a licensing system that will restrict the figure and location of mercantile establishments allowed to sell baccy merchandises. This is to forestall the illegal coffin nails from easy obtained and to forestall illicit mobs from taking the advantage.

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Minimal monetary value is the state of affairs when the authorities set the monetary value above the equilibrium monetary value. When the authorities enforce minimal monetary value of RM30 per battalion, authorities really will cut down the ingestion of the coffin nails. It besides will forestall the manufacturers from cut downing the monetary value below it. Figure 1 shows the state of affairs might be when authorities were to implement a minimal monetary value in the market for baccy merchandise.

Monetary value of coffin nails ( $ )

RM30 Minimum monetary value

RM9.30

0 Q1 Qe Q2

Measure of coffin nails ( per battalion )

Fiqure 1: Minimal monetary value of coffin nails

Without authorities intervention, the equilibrium will be Qe at a monetary value of RM9.30. Government imposes a minimal monetary value at monetary value of RM30 per battalion in order to cut down the ingestion of coffin nails. At monetary value lower limit of RM30, merely Q1 will be demanded because the monetary value has risen and Q2 will now be supplied. Therefore there will be extra supply baccy merchandises. So as the higher monetary values of RM30 the ingestion of coffin nails fall from Qe to Q1. By making this besides authorities really have gained more revenue enhancement gross from the manufacturers of coffin nails because of the higher monetary values.

But such of this method that taken by authorities really can non alter the consumer from smoke because coffin nails are the addictive goods which have inelastic demand. Eventhough the monetary value degree is increase to RM30 per battalion, people still purchase it.

Consumers besides have the other option instead than purchasing the high monetary value coffin nails by purchasing the inexpensive coffin nails trade names. From the articles the cheaper trade names of coffin nails were widely available from RM2.20 to RM2.50 which are really inexpensive coffin nail trade names. The alteration of the monetary values of coffin nails that impose by authoritiess agencies that some consumers will exchange from purchasing the high monetary value coffin nails to purchasing cheaper coffin nails. Therefore there will be a autumn in demand for the high monetary values coffin nails, and the demand curve will switch to the left from D to D1.

At the same clip, the ingestion of coffin nails fumes besides brings about negative outwardnesss of ingestion due that the coffin nails consumed affect the 3rd parties which is the secondary tobacco users. The negative outwardnesss of ingestion experienced where the fringy societal benefits less than the fringy private benefits. Figure 4 shows the negative outwardnesss of ingestion of coffin nails fumes.

Peoples who smoke will make external cost for other people. This is normally known as second-hand smoke. Due to the free market, consumers will maximise their private benefit and consume at the degree where MSC=MPB. They will disregard the negative outwardness that they create. This means that they will over-consume coffin nails by smoking Q1 coffin nails at a monetary value of P1. The socially efficient end product is at Q* which means there is over-consumption of Q1 to Q* . Since MSC is greater than MSB for these units, there is welfare loss to society and a market failure.

Therefore authorities has to move to cut down the negative outwardness by impose indirect revenue enhancements on coffin nails in order to cut down ingestion. By making this the MSC curve will switch upwards to MSC + revenue enhancement. This will cut down ingestion to the socially efficient degree of end product Q* and the monetary value to the consumers will be P2 which is higher than earlier. Governments so will derive important gross and this gross can be used to rectify negative outwardnesss of ingestion.

Figure 5: Measures to cut down indirect negative outwardnesss of ingestion by indirect revenue enhancements

However, even the indirect revenue enhancements is imposed, the inelastic demand for coffin nails mean that revenue enhancements do non pull off to cut down measure demanded really much.Eventhough authorities gross increased, the measure demanded does non fall to the socially efficient degree.

As the decision in order to hold better safeguards and prevent assorted trade names of coffin nails from easy available, so authorities should step in by restricted the Torahs and work it efficaciously.

The Star Online

Published: Friday October 30, 2009 MYT 3:29:00 PM

Cap wants higher monetary value for ciggies, RM30 for battalion of 20

By ANDREA FILMER

andrea @ thestar.com.my

GEORGE TOWN: The Consumers Association of Penang ( CAP ) has lauded the Government ‘s move to enforce a minimal monetary value on coffin nails but hopes it would be higher — about RM30 per battalion — to earnestly discourage people from smoking.

CAP president S.M. Mohamed Idris said a proposed monetary value of RM6.20 for a battalion of 20 coffin nails was “ disappointingly low ” and the Government needed to badly stem the sale of cheaper trade names in the market for the move to hold any consequence.

“ While CAP lauds the move mooted by Health Minister Datuk Seri Liow Tiong Lai to put a minimal monetary value for coffin nails effectual from Jan 1 2010, it is let downing to observe that the monetary value fixed is so low that it would be a ineffectual move, ” Mohamed Idris said in a imperativeness conference on Friday.

Liow had announced on Wednesday that a minimal monetary value for battalions of coffin nails would be implemented from following twelvemonth in an attempt to look into the handiness of cheaper coffin nails in the market.

Mohamed Idris suggested that a battalion of 20 should be priced closer to RM30 to do an impact.

“ The monetary value of premier trade name coffin nails here are significantly cheaper than those in other states.

“ For illustration, premier battalions of 20s in Singapore are priced between RM27 to RM80 ( S $ 11 to S $ 32.80 ) , ” he said.

Mohamed Idris said premium coffin nails sold in Malaysia for approximately RM9.30 per battalion of 20 while cheaper trade names were widely available from RM2.20 to RM2.50.

“ In a recent study carried out by CAP, we found that the sale of alleged ‘value trade name ‘ coffin nails, which are really inexpensive coffin nail trade names, have increased.

“ Various trade names, some of which are sold duty free in Langkawi, are easy available in topographic points that sell coffin nails and most of these do non even carry a image warning ( of the effects of smoking ) on the box, ” he added.

Mohamed Idris besides called for a speedy arrest of the sale of battalions incorporating fewer than 20 coffin nails, every bit good as the sale of loose coffin nails.

“ To break enforce this, a licensing system that limits the figure and location of mercantile establishments allowed to sell baccy merchandises should be introduced, with licenses that are subjected to annually renewal.

“ It is hard to censor coffin nails wholly, but serious hindrances need to be introduced to halt people from acquiring coffin nails so easy, ” he said, regenerating CAP ‘s call to raise the minimal legal age of purchase of baccy merchandises from 18 to 21 to fit the legal vote age.

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