Examine the economic issues surrounding the introduction of plain Essay

Examine the economic issues surrounding the introduction of plain packaging of cigarettes. Should this policy be introduced - Essay Example Plain Packaging of Cigarettes The plain packaging of this tobacco product is alternatively known as homogenous or generic packaging. The standardised packaging system of this form involves removal of all the lustre out of the presentation of the product. The branding for the cigarettes which is expressed mostly through the colours, the logos and the trademarks needs to be removed from the pack of cigarettes that finally reach the customer. The packaging should be done with a plain brown cover with the name of the brand printed in a uniform style in a predetermined size. Thus there is very little flexibility on part of the companies in presenting the products to the end users. Along with that the packs also contain mandated information about the ill effects of the product and the legal disclosures like the tax stamps. This concept of plain packaging had been proposed in countries like New Zealand, Canada and Australia since the end of 1980s (Voon, Mitchell, and Liberman, 2012, p. 12). These attempts were taken with the main motive of reducing the amount of consumption of tobacco in the countries. There have been various researches done during these years to determine the outcome of the introduction of plain packaging of tobacco products. ... Economics of Plain Packing of Cigarettes For any normal good, the change in the price of the product will have an effect on the quantity of the product consumed. When the prices increase people would consume less of that product. This is however not true in case of products which are addictive in nature. Even through the prices increase the quantity of the products consumed would not decrease. Thus the price elasticity of demand for the products would be zero. The economics of the plain packaging has been explained with the help of the following graphs. The demand for cigarettes would be an inelastic demand curve (Tucker, 2010, p. 140). This is because even though the prices of the cigarettes change the demand would remain more or less constant this is because people generally get addicted to tobacco and they cannot control the amount that they consume even on the increase of the price (Baumol and Blinder, 2009, p. 108). That means the smokers are insensitive to price changes. In the left panel of the graph the demand and supply curves have been drawn. (Perloff, 2011, p. 33) Now on the introduction of the plain packaging of the cigarettes the product will lose its appeal to the prospective smokers. As a result the smokers would be demanding less amount of cigarette. Therefore there would be a shift in the demand curve for cigarettes. In other words the number of smokers would reduce. However, the demand curve would remain inelastic because this reduction in demand would not be as result of the change in the prices but the reduction in the level of desire of the consumers to smoke. The demand for this product would remain restricted to those people who are addicted to smoking. Thus even if the supply curve