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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