Negative Externality Of

Smoking

Moon Kyu Kim

Video/Images http://www.youtube.com/watch?v=S0lH4GEFy1o

Market Failure

Negative Externality of consumption

Explanation

• It is negative externality of consumption because smokers ignore the unintended but harmful impact of “passive smoking” on non-smokers.

• It is market failure because free markets are operating without any government intervention, deliver an inefficient or inequitable allocation of resources. If cigarette consumers only consider their own private costs and benefits of consumption, then there will be over consumption of cigarettes. If the negative effects on other consumers is considered the socially desirable level of consumption would be Qs.