ECO402 - Microeconomics

The Case: The estimated number of smokers all around the world is 680 million and about 80% of them live in the low-income and middle-income countries. Over 100,000 Pakistanis die each year from tobacco related diseases. Majority of these deaths result from lung and other cancers, respiratory diseases, strokes, ischemic heart and other cardiovascular diseases. World Health Organization (WHO) advocates strict tobacco control laws, large-sized pictorial health warning on packs and plain packaging, comprehensive ban on tobacco advertising promotion and sponsorship, implementation of “health tax” on tobacco products and increased taxation as well as continued health awareness campaigns. In budget 2019-2020, Federal Excise Duty (FED) on cigarettes has been increased that would mobilize Rs. 147 billion revenue, compared to estimated Rs. 114 billion for 2018-19. Further, Government of Pakistan has also announced Rs. 10 health tax per packet of 20 cigarettes. Requirement: Logically discuss the impact of the implementation of health tax on cigarettes on the consumers and producers.