Is a smoking ban in playgrounds the most effective way of reducing this market failure?

Market failure occurs when the free market results in external costs not accounted for by the producer or the consumer; in this case, smoking.

Smoking in playgrounds could promote the wrong idea about smoking to children. There will be no obvious signs of ill effects as these may take a long time to develop and therefore children may grow up thinking smoking will not cause harm.

A smoking ban in playgrounds is an example of local government intervention which could help reduce the externality and the quantity of consumption. If consumption falls then social costs (which include external costs) will also fall.

BUT this intervention may not work if smokers simply ignore the ban and it is not regulated. so someone smokes and nothing happens to them in the form of punishment and so there is no deterrent.

Even if the ban is enforced this will be expensive.

So, when considering whether it is the 'most effective' then of course you also have to consider other methods such as taxation or information campaigns.

There is also the point that even if you don't smoke in the playground you may smoke in many other places so your total smoking may not fall and the NHS costs also may not fall. 

You also consider whether many people smoke in playgrounds at all - if not many then the ban - even if it works - is hardly going to be effective. To be effective it would have to be extended to more areas where children are present.

Ideally the ban is likely to be more effective when used in conjunction with other interventions such as the change in cigarette packaging.

Of course, as readers of this blog know, a smoking ban for playground smokers was considered here....weeks ago

How might the state of the UK economy affect a Canadian exporter?

As soon as we see 'state of the economy' we know we must consider:

(Changes in)

Interest rates
Exchange rates
Tax levels
Government spending

as well as:

(levels of)

Economic growth
Unemployment/employment (as both may rise)
Balance of Payments
Inflation

Clearly the global economy will also have an effect

It also depends which industry we are considering...and where/who the market is

Plus the role of expectations

Stakeholder Conflict

Many business objectives complement each other and are acceptable to a broad range of stakeholders. For example, an objective for a business start-up of achieving survival would be supported by nearly all the stakeholders.  It is in no-one’s interest for a business to fail! However, once a business becomes better established and larger, then potential conflicts begin to arise.  Let’s look at two examples in a little detail:

Business expansion versus higher short-term profit:

An objective of increasing the size and scale of a business might be supported by managers, employees, suppliers and the local community – largely for the extra jobs and sales that expansion would bring. 

However, an expansion is often associated with increased costs in the short-term (e.g. extra marketing spending, new locations opened, more production capacity added).  This might result in lower overall profits in the short-term, which may cause conflict with the business shareholders or owners.  In the longer-term, however, most business owners would be pleased to support an expansion if it increases the overall value of the business.

Job losses versus keeping jobs

This has been a big issue for many businesses during the economic downturn in 2008-2010.  In order to reduce costs and conserve cash, business managers have often made redundancies amongst the workforce or introduced other measures like short-time working to reduce wage costs.  This will have been supported by business owners and managers. 

However, it creates a potential conflict with stakeholders such as employees (who are directly affected), the local community (affected by local job losses) and suppliers (who suffer from a reduction in business).

Here are some other potential causes of conflicts between stakeholders:

• “Short-term” thinking by managers may discourage important long-term investment in the business
• New developments in the business such as a major product launch or new factory may require extra finance to be raised, which reduces the control of existing investors
• Investing in new machinery to achieve better efficiency may result in job losses
• Extending products into mass markets may result in lower quality standards

Source: tutor2u

Why might supply curve shift?

• 1.Changes in the costs of production

• Lower costs of production mean that a business can supply more at each price. For example a magazine publisher might see a reduction in the cost of its imported paper and inks. These cost savings can then be passed through the supply chain to wholesalers and retailers and may result in lower market prices for consumers.

• If the costs of production increase, for example following a rise in the price of raw materials or a firm having to pay higher wages to its workers, then businesses cannot supply as much at the same price and this will cause an inward shift of the supply curve.

• A fall in the exchange rate causes an increase in the prices of imported components and raw materials and will lead to a decrease in supply. For example if the pounds falls 10% against the Euro, it becomes more expensive for British car manufacturers to import their rubber and glass from Western European suppliers, and higher prices for paints imported from Eastern Europe.

• 2.Changes in technology

• Production technologies can change quickly and in industries where change is rapid we see increases in supply and lower prices for the consumer.

• 3.Government taxes and subsidies and regulations

• Indirect taxes cause an increase in production costs - an inward shift of supply

• Subsidies bring about a fall in supply costs – an outward shift of supply

• Regulations increase production costs – an inward shift of supply

• 4.Changes in climate in agricultural industries

• For commodities such as coffee, oranges and wheat, the effect of climatic conditions can exert a great influence on market supply.
• Favourable weather will produce a bumper harvest and will increase supply. (An outward shift)
• Unfavourable weather conditions including the effects of drought will lead to a poorer harvest, lower yields and therefore a decrease in supply (inward shift)
• Because commodities are often used as ingredients in the production of other products, a change in the supply of one can affect the supply and price of another product. Higher coffee prices for example can lead to an increase in the price of coffee-flavoured cakes.

• 5.Change in the prices of a substitute in production

• A substitute in production is a product that could have been supplied using the same resources. If cocoa prices rise for example this may cause some farmers to switch from other crops and invest money in establishing new cocoa plantations.

• 6.The number of producers in the market and their objectives

• The number of sellers in an industry affects market supply

• When new businesses enter a market, supply increases causing downward pressure on price. If the existing businesses decide to move away from maximising their profits towards seeking a higher share of the market, then total supply available at each price will increase – the market supply curve will shift outwards.