Idaho+Legislature+Looks+At+Tobacco+Tax+Increased+Today+by+Regina+Yoo

//**REMEMBER: DO NOT SUMMARIZE THE ARTICLE!!!**//

=TITLE OF EXTRACT:= Idaho Legislature Looks at Tobacco Tax Increase Today =SOURCE:= []

=DATE EXTRACT WAS WRITTEN:= March 12, 2012

=DATE CURRENT EVENT WAS WRITTEN:= March 25, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= The Idaho legislature decided to impose tax on tobacco, so that it will be able to decrease the number of young adults smoking. When a tax is imposed, there are certain effects on the consumers, producers, the government, and the market as a whole. This tax imposed on tobacco is imposed on expenditure. The tax is placed upon the selling price of a product, and so it raises the firm's costs and shifts the supply curve for the product vertically upwards by the amount of the tax. The producers of the firm would want to raise the price according to the shift in the supply, in order to pass on all of the cost of the tax they had, to the consumers. Their ultimate goal is to increase profit, and so they do not want to pay the increasing costs of making the product. However, at that increased price, there would be an excess supply and so the price eventually has to fall until a new equilibrium comes, where stable amount of the product is produced at a stable price.

=VOCABULARY TERMS AND DEFINITIONS:=
 * Tax: a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.
 * Market: where buyers and sellers come together to carry out an economic transaction and settle at an equilibrium price of a good or service.
 * Supply: the willingness and ability of producers to produce a quantity of a good or service at all prices in a given time period.
 * Excess Supply: occurs when the price of a good is higher than the equilibrium price, such that the quantity supplied is greater than the quantity demanded.
 * Price: the amount of money expected, required, or given in payment for something
 * Opportunity Cost: the second best choice when an economic decision is made
 * Profit: a financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something
 * Equilibrium: a situation in which supply and demand are matched and prices stable.

=DIAGRAMS:=

=EVALUATION:= The state imposed tax on tobacco, and the article states “Low admits there has been strong resistance in the Legislature to raising any taxes to boost state revenue, so this bill makes it clear that most of the money generated would go toward covering tobacco-related health care costs.” Therefore, we can see that the tax imposed was quite effective, because it was not just for the government’s benefit, but also for the public, the society and the youth. The government is recycling the money it earned from taxes, and get two benefits at the same time: decrease young tobacco users, and teach and inform youth to stop them from smoking. However, there are certain opportunity costs to this governmental decision. While it helps decrease supply and so consequently decrease teenage smoking, there could have been other better choices that could’ve improved the conditions even more. The government could have spent the money that they gave to covering tobacco related health care costs, to other perhaps more important things in the country, such as people suffering poverty and general health care costs. This way, the money will not only focus on teenage smoking, but a broader problem like poverty, health care and education. If the government would really want to decrease youth smoking rates, it can use the money to promote huge education programs or seminars to invite students to inform them about the detrimental effects of tobacco use. This way the government doesn’t have to get the tobacco producers to increase cost for every single product, but just hold a few huge event to increase efficiency.