Plain Packaging on Cigarettes

Question: Describe about the Plain Packaging on Cigarettes? Answer: 1: Market power or monopoly power can be exercised in those markets where there is a single seller of a particular good and the seller acquires substantial power over the price. In all cases a monopolist is famous for charging high price at the expense of the consumers. In this case, there are two countries both selling a given good at different prices. It is assumed that Country charges high price for the good than the Country B. Here the consequence of monopoly power can be justified if Country is A selling the good in domestic market that is in his own country. The monopoly power in the domestic market can be exercise if it does not have any competitor or strong substitute goods. But if both countries engage in beneficial trade then the consumers of Country A may find that the same good is cheaper in Country B. Then the consumers can import such a good from Country B. so in the international market Country may not be able to exercise monopoly or market power because Country B will ac t like a competitor and thus will be able to capture the market share of that particular good. So for Country A things would not be favourable if trade opened up between the countries and consumers start comparing between the price of goods and make rational purchase of good where the price is low. For example, British Steel exercises monopoly power in the domestic market but faces international competition. This is because with the increase in globalization, the firms need to exercise monopoly power domestically in order to be competitive globally. Thus the notion is not purely correct or not purely wrong but is uncertain. (Economicsonline.co.uk, 2015) 2: The plain packaging law for cigarettes meant homogenous packaging where all branding like logos, trademarks, images etc. needs to be removed. This was adopted for a universal reduction in tobacco consumption. But the effectiveness of such measures is criticized in many countries on that the ground that it did not reduce the tobacco sale rather increased the sale of cigarettes. But the biggest cigarettes makers have a different outlook to this law and they found out that this law can be detrimental to their business. So they opposed the measure and announced that they would take legal steps so as to withhold the law (Australia, 2014). The reason behind such action is that the plain universal packaging might influence the smokers to quit their habit which would reduce sale of their cigarettes and in turn reduce their revenue from it. This would leave the producers worse-off. In 2009, National Preventative Health Taskforce reported that the packaging plays an important role that mislead s the smokers about the detrimental impact of tobacco. Hence, this posed a threat to the cigarette makers. (Tobaccotactics.org, 2015) From the economic point of view, the law could not prove its efficiency. This is because a study show that about 57% of British smoker said that it is difficult for them to quit smoking no matter what the package looked like. This law can also give rise to illegal trading of cheap cigarettes. Smoking has a strong relation with poverty. High wage earners tend to smoke less and the low wage earners smoke heavy. But if this prohibition is taken seriously and people get influenced by it and quit smoking then it can improve the death rates and reduce the epidemics. This overall improvement in health can be depicted by the Human Development Index of the countries which takes the life expectancy rate into account. (Dodds, 2014) 3: The survey by the IMPI revealed that around 70% of the Mexican population engages in consumption and purchase of pirated goods and services. The government has taken several copyright enforcement efforts with the help of the right holders to prevent the sale of pirated products. The impact of such law enforcement has benefitted the country but the pace of the effectiveness of the law was regarded to be very slow between the right holders and Internet service providers. (Karaganis, 2011)The direct impact of penalizing the pirated companies and the internet users is that there operation reduced and the situation or market conditions for the rights holders improved. The law enforcement also helped to stop the illegal trading of goods at cheap rates. (Spink and Levente Fejes, 2012)The economic implication is that the law helped to stabilize the prices of goods sold by the rights holder. In this regard, the elimination of piracy causes demand and supply to regulate and determine the corre ct equilibrium price and quantity. This determined price can be slightly higher than the pirated price but the interest of the rights holder would be improved. (INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA) 2014 SPECIAL 301 REPORT ON COPYRIGHT PROTECTION AND ENFORCEMENT, 2014) References: Australia, W. (2014).Why plain packaging is reducing the number of smokers in Australia. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/comment/why-plain-packaging-is-reducing-the-number-of-smokers-in-australia-20140624-zsjt9.html [Accessed 21 Mar. 2015]. Dodds, L. (2014).Plain packaging on cigarettes: Where does it all end?. [online] Telegraph.co.uk. Available at: https://www.telegraph.co.uk/news/health/11261789/Plain-packaging-on-cigarettes-Where-does-it-all-end.html [Accessed 21 Mar. 2015]. Economicsonline.co.uk, (2015).Monopoly power. [online] Available at: https://economicsonline.co.uk/Market_failures/Monopoly_power.html [Accessed 21 Mar. 2015]. INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE (IIPA) 2014 SPECIAL 301 REPORT ON COPYRIGHT PROTECTION AND ENFORCEMENT. (2014). 1st ed. [ebook] Available at: https://www.iipa.com/rbc/2014/2014SPEC301MEXICO.PDF [Accessed 21 Mar. 2015]. Karaganis, J. (2011).Media piracy in emerging economies. New York, NY: Social Science Research Council. Spink, J. and Levente Fejes, Z. (2012). A review of the economic impact of counterfeiting and piracy methodologies and assessment of currently utilized estimates.International Journal of Comparative and Applied Criminal Justice, 36(4), pp.249-271. Tobaccotactics.org, (2015).Plain Packaging in the UK - TobaccoTactics. [online] Available at: https://www.tobaccotactics.org/index.php/Plain_Packaging_in_the_UK [Accessed 21 Mar. 2015].