Wednesday, January 30, 2008

Unit 2: Demerit goods and sucessful government action: Raising the age you can buy cigarettes

The BBC reorts that nearly 165,000 people in England gave up smoking with the help of the NHS last summer, when lighting up was banned in enclosed public spaces.

http://news.bbc.co.uk/1/hi/health/7214849.stm

a) Why is smoking a demerit good?
b) Why does it represent an example of market failure?
c) How has the government action reduced the market failure?

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