India bans e-cigarettes

CNN: India is banning all e-cigarettes over fears about youth vaping

Article published: Sep 18, 2019

IB Economics syllabus: Microeconomics (negative externality of consumption, government intervention)

India has completely banned all e-cigarettes in the hope to cut all the adverse health issues associated with them. While smoking is usually shown by a negative consumption externality diagram, an outright ban would actually mean that there is no (legal) supply of the product, hence the market no longer functions. Remember, that for a market we need both buyers and sellers, but without sellers, there would be no transactions taking place, hence there is no market activity (nothing to show in a diagram).

On the other hand, it is highly probable that e-cigarettes will still be sold illegally on the black market, which is the downside of an outright ban. The government hopes that the punishment given to dealing with e-cigarettes will deter people from entering the black market either as a buyer or a seller.

Source of image: Prakash Singh / AFP / Getty images

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