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On the subject of externality there is the aspect of Negative Externality and it involves both the consumer and the producer who collectively neglect the environment and what implications their activities have on the environment. It could also involve one of the two parties leaving the other out of consideration; for example when a producer releases a harmful product into the market and it results into the death of a consumer. This is one scenario that has been satisfied by the tobacco company. The health effects (lung cancer) of smoking to both the active and passive smokers cannot be over emphasized. The medical bills that the smoker incurs in the course of treatment is substantial and then there is the pain endured during ones illness and the ultimate price is the loss of life. Regardless of these hazardous effects, the cigarette industry continues to thrive over financial gains from the sale of its product.
In the United States, the Food and Drug Administration (FDA) has controlled the tobacco company through the regulation of their products. It has done this by: restricting the advertising and promotion of tobacco products and this has worked to promote healthy living since the public is less aware of the existence of the product. It has banned all tobacco products which are flavored like fruits and candy and this has made them less attractive to minors and individuals with refined tastes. The companies are barred from purporting any reduced risk products and this has played the role of reducing the number of new smokers or prospective ones. It requires the companies to fully disclose the health effects of their product, the contents and any changes they might have made; with this knowledge in the public eye, the consumers are empowered with information. The disadvantage that comes with these legislations is that the sale of the product is still legal so long as the relevant companies abide by them. The ...Show more
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This comes with its impacts on a social society and these can be classified into various forms: externality, monopoly, public good and information…
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