Price Elasticity of Demand for Cigarettes (a) Studies indicate that the price elasticity of demand for
cigarettes is about 0.4. If a packet of cigarettes currently costs £2
and the government wants reduce smoking by 20 per cent, by how much
should they increase the price?
Price elasticity of demand is equal to proportionate change in
quantity demanded divided by the proportionate change in price, and so
to calculate how much the government should increase the price of
cigarettes to, the formula must be rearranged into the form,
proportionate change in quantity divided by the price elasticity of
demand, and so to calculate the new price of cigarettes we must divide
20 by 0.4, to get the percentage increase which is 50 percent.
Therefore the new price for cigarettes will be £3.
(b) If the government permanently increases the price of cigarettes,
will the policy have a larger effect on smoking one year from now or
five years from now? Explain your answer.
If the government permanently increases the price of cigarettes I
believe the policy will have a larger effect in the short-run than in
the long run. My premises is that when the government increase the
price of cigarettes a proportion of the population will find that they
are too expensive and so will have to quit smoking or reduce their
consumption, and in one year’s the strata of society who smoked when
the price was increased, would have now quit, and so would not go back
positive and healthful image. This is where beautiful men and women would be seen socializing
This report explores E-cigarettes. First, it introduces E-cigarettes, their market information, and their special characteristics. Second, the report will state their market structure, market competitions and government regulations. Then, the report will explain why E-cigarettes should be normal goods and how the suppliers could increase demand. Next, the report will analyse the development of this market, its opportunities for new entry and whether it is sensible to open a new business. Finally, it will make the conclusion about them. The report will introduce what is E-cigarette first.
Sloan Wilson did not publish The Man in the Gray Flannel Suit, a classic on 1950's middle-class conformity, until 1955. But, by July 1953, PALL MALL cigarette advertisers appear aware that "society seemed to reward those who lacked rough edges and eschewed eccentricity" (Blum 794). This conclusion seems justified by a TIME magazine advertisement. Here, these promoters apply this conformity principle and other advertising techniques to a specific socioeconomic group. They seek to lure the expanding male, middle-class audience by presenting indecorous fun, an enticing social situation, and smooth smoking delight all stemming from their product.
Borio, Gene, “Tobacco Timeline: The Twentieth Century 1900-1949—The Rise of the Cigarette.” Chapter 6. 1993-2003.
"Smoking Bans and the Tobacco Industry." Issues & Controversies. Facts On File News Services, 1 July 2013. Web. 4 Dec. 2013. .
in only a few years time we will notice a drastic decline in the total
A growing trend in the United States is the use of an electronic cigarette as an alternative to regular cigarettes. An electronic cigarette burns a liquid solution containing a controlled percentage of nicotine with no carcinogens, and this provides the user with smoke that is actually vapor. According to Allen Mask M.D. (2014), “Sales of electronic cigarettes have boomed from $500 million in 2012 to $1.5 billion in 2013” (Mask, 2014). The growth of sales in electronic cigarettes over the years is because it is being marketed as a healthier alternative, and more stores are opening to help assist others on selling as well as fixing their devices. The reason why electronic cigarettes are a healthier alternative than regular cigarettes is that cigarettes are the leading causes of preventable death in America, because electronic cigarettes produce vapor not smoke, and it has helped people quit.
The average cost of a pack of cigarettes is 5.51; However, Missouri’s and Virginia’s average cost is the lowest at 5.25 per pack while New York’s is the highest at 12.25 per pack. If a person smokes a pack a day for 20 years they will end up spending anywhere from 38,220 to 93,548. This amount of money could be a down payment for a house, a car, a college degree, and the list goes on. The cost of smoking goes beyond the unit price of a pack, it also includes the cost of health care. Smoking cigarettes has an extreme effect on the tax payers and health care system. In an up to date questionnaire, analyst came up with a calculation that suggest 8.7 percent, which is 170 billion dollars, of all health care expenses is for sickness or diseases caused by smoking cigarettes (Kennedy). Some life insurance companies will not insure someone with smoke related illness and if they do the premiums are often higher than a
In a research article by Gallet (2004), several aspects of the clean indoor-air laws were closely examined. Set apart from other literature on the same topic, Gallet (2004) proposed that the degree of enforcement of these laws was just as important as the laws themselves. States that maintained the most restrictive clean-air laws encouraged much more competition within the cigarette industry; hence prices were adjusted closer to marginal cost which caused the availability of supply to increase (Gallet, 2004). Conversely, Keeler, Barnett, Manning, & Sung (1996) concluded that the price adjustment closer to marginal demand could be explained as an attempt to compensate for the reduction of demand caused by the antismoking laws. Regardless of the opinions of the papers on this aspect of the clean indoor-air laws, both agreed that state regulations that prohibit or limit smoking in public places decreased the cigarette demand.
The tobacco industry is important to the economy. In 1991, worldwide tobacco sales exceeded $59.8 billion and in 1992 the industry was rated as one of the top one hundred advertisers (Pechmann and Ratneshwar, 1994). However, there are high prices to pay - socially, economically, and personally - as a result of this industry. Annual mortality figures indicate that cigarette smoking is the number one cause of preventable death in the United States. An estimated 390,000 people die each year of smoke related illnesses, which is greater than the combined mortality for cocaine, crack, AIDS, homicide, suicide, and alcohol abuse (Botvin, G., Baker, Botvin, E., Dusenbury, Cardwell, and Diaz, 1993).
Cigarettes cause heart disease, lung disease, cancer, and death. Made with a higher nicotine level, cigarettes create addiction and targets to attract a younger audience with flavors and sugar additives; in addition, to cut the harshness of smoke inhalation chemicals are added, enhancing the nicotine’s addiction. Cigarettes create a financial burden due to their rising costs once addicted, due to their recurring daily and yearly costs to
A cigarette, briefly referred to as a cigar could simply be regarded as a paper wrapped roll of dry tobacco leaves which are smoothly cut. The finely cut dry leaves of tobacco are rolled to make a cylinder-like pipe which is used for smoking. A cigarette is light on one end while the other end is placed into the mouth of the smoker for inhaling. Most cigarettes have on one end a filter. Cigarettes may be made of either tobacco as earlier stated or from cloves, or cannabis. Normally a cigarette is smaller than a cigar.
All consumers should aware themselves of the factors involved with price elasticity and how the traits potentially impact their purchases and personal or commercial budgets. Commercial firms have the problem of managing price elasticity with their products and prices and governments have a constant problem of determining taxes from price elasticity. I used three examples to attempt solving how firms manage their products with price elasticity factoring with Proctor & Gamble, the oil, and airline industries. I used government examples of how the attempts to collect data to formulate their policies for taxation on elastic and inelastic products while also describing how the US Postal Service uses price elasticity to compete with corporate competition. Exposure to these factors of price elasticity will generate consumers’ awareness of firms and governments role to determine goods or services at a particular price.
Although it is beneficial for the economy for the production of tobacco products it is extremely risky to use the product. According to researchers second-hand smoke is terrible for everyone in the world who walk by someone who is exhaling. In the article by Robert Proctor “Why ban the sale of cigarettes? The case for abolition” he states that cigarettes are the “most deadl...
Tobacco is made from dried up tobacco leaves prepared with chemicals to create products such as: chewing tobacco, dip, and loose tobacco to be smoked on cigarettes and pipes. There is a demand for tobacco and if companies were to stop making tobacco, then another company will sell it due to supply and demand. Even though people do choose to buy tobacco products on their own free will. Tobacco companies are partly to blame for smoking related illnesses and deaths since they knowingly create a product that is harmful, in addition, they try to appeal to a younger audience, and lastly, tobacco products are highly addictive.