Cigarette Economic Analysis

"Use of e-cigarettes has grown quickly in the last decade, with U.S. sales expected to reach $4.1 billion in 2016." Electronic cigarettes are substitutes to cigarettes. As the price of one good increases, the quantity demanded of that good, and thus the quantity demanded of the substitute good would increase. This is evident on the graph below. As the tax causes a price increase from P1 to P2,the quantity demanded of e-cigarettes also increases from Q1 to Q2. Cigarettes and e-cigarettes would therefore have a positive cross-price elasticity of demand which would be small in the short term but large in the long term. It is extremely difficult for people to switch any addictive habit. However, over the long term, citizens would have time to adapt and switch to electronic

The purpose of this economics report is to illustrate the economic concerns and arguments around smoking in Australia and the methods of taxing aimed at reducing the smoking rate. The report will use a variety of research articles, economic theories and models to report on this issue so that the CEO of the Cancer Council of Australia has a thorough understanding.

Even simpler, Guindon et al.158 analyze the trend of cigarette affordability by considering the annual real percentage changes in cigarette

There are many cities who have implemented bans on cigarettes, but China overall is still the leading consumer of cigarettes in the world. A countrywide tax on cigarettes has been proposed to their Ministry of Finance, and Ministry of Economics and Trade, but a decision has yet to be made. Tobacco production provides substantial revenue to the government and a tax increase will have a significant effect on the central government and reduction of consumption of cigarettes. According to a study done by the group proposing the tax, “a 25% tax increase will have an overall monetary benefit that far exceeds the negative impact on the cigarette industry and tobacco farmers. In financial terms alone, not counting the number of lives saved and medical care cost savings, the gain of the central government tax revenue (24.58 billion Yuan) twice exceeds the loss of tobacco farmers’ earnings, tobacco industry workers’ earning and loss of industry and local government revenue (11.74 billion Yuan)” (Hu TW 107). There many components to this calculation, but some factors included the reduction of cigarette consumption, the number of lives saved, savings in medical care costs, gains in productivity due to avoidance of premature death, industry revenue lost, lost jobs in cigarette industry, loss of tobacco income, and loss of local government

Recently, there has been a new trend in the tobacco industry in Australian society due to the increased prices of cigarettes, mainly for the reason that “with more than 3.1 million people still smoking today, tobacco still being the leading cause of death by a wide margin… “ (Scollo & Winstanley, p.xiii, 2008). Therefore, this report will illustrate the market structure of Australia tobacco industry, and then make analysis about the price chances on the demand and supplies for cigarettes. The third and the fourth part of the report are about the impacts of this change and some government policies for the tobacco industry, respectively.

The cigarette industry is known to cause market failure. It burdens society with disease and reduces social economic welfare. These negative externalities are thought to far outweigh any economic benefits that the industry yields (Guhl & Hughes n.d). To combat this, governments implement indirect taxes with the aim of reducing the number of smokers. Evidence shows that this has been the most effective means of reducing demand for cigarettes (Cotter, Dunclop & Perez 2011). In the context of the competitive model, this essay will explain how taxes on cigarettes reduce demand, including discussion of the short-term and long-term price elasticity of demand, how the tax burden is distributed between consumers and producers, redistribution of

This analysis of the diagrams represents how little difference is tax is likely to make because of the inaccuracy of the theoretical analysis and the large inelasticity of PED. I have represented the inelasticity by a steep curve for demand and the PMB in each of the graphs so that a unitary increase in price will cause a very small decrease in demand. As such a regressive tax will not only cause a small change in demand but displacement within the poorer communities, I will say that a tax is not an efficient or even moral way to tackle the issue of the negative externalities caused by smoking. But smoking is not just a production issue; it is also a consumerism issue. Too many cigarettes are being consumed, and so I believe that a value judgement towards the most effective method of reducing the negative externalities caused by

Many researchers maintain that tobacco taxes efficiently result in decreases in cigarette usage while others attest to their belief that tobacco taxes are an ineffective disincentivization of cigarettes. For example, a recent study conducted by the National Bureau of Economics maintains that “Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant.” On the other hand, many economists advocate for increasing tobacco taxes and believe them to be “important in achieving reductions in tobacco use and the public health toll caused by tobacco.” Using data gathered by Boston College and analysis through the program Stata, the authors attempted to prove a negative correlation between price

Given the oligopolistic nature of the US tobacco product industry, the remaining firms are forced to compete through aggressive marketing and advertising strategies that are subsidized by their high economic profits. A 1976 report for Phillip Morris (now Altria) described the nature of tobacco product pricing as “some sparring among potential price leaders, after which the rest of the industry accepts the resulting price structure” (IARC, 2014). This report offered that a “relative absence of price competition in the market” allowed prices to offer high profits which were then used to support other marketing and advertising activities, which is where cigarette companies were more likely to compete aggressively with one another (IARC, 2014). Tobacco companies have consistently raised prices on their products beyond the various tax increases put on at the state and federal level, passing on this additional cost to the customer (USDA Economic Research Service, 2007). Moreover, the tobacco companies have also acted opportunistically as a group by earning more profits on a per unit basis after the introduction of tobacco taxes. This price increase strategy could be recommended if consumers don’t associate the price increases with profit-seeking from the tobacco companies, but instead associate it with the government (IARC, 2014).

Cigarette consumption is a worldwide growing business that concerns about the health problems issue publicly by providing all the maternal element that used to make health strategy weak and down. The impact of the anti-smoking campaign on the consumption of cigarettes is measured by fitting cigarette demand functions to pre-campaign dat, projecting "ahead" as if the campaign had not occurred, and then comparing these predictions with realized consumption. However, the cumulative effect of persistent publicity supported by other public policies, has been substantial: in the absence of the campaign, per capita consumption likely would have exceeded its actual 1975 value by 20 to 30 per cent. This is a conservative indication of the effectiveness of the campaign, for it ignores other potentially important and desirable behavior changes, such as the shift to low "tar" and nicotine cigarettes.

Aim of this work is to analyse tobacco tax in Germany and find out under which circumstances it can be used as instrument to increase revenues from this excise tax for the state or to discourage smoking. The German market was analysed to find out that roughly 26% of the population are smokers, generating revenue of 13.37

The research shows a decline in use as soon as the tax was applied. The cigarette tax in particular could serve as a model for the outcome of a fat tax. For example “following a steep cigarette tax in the late 1990s which raised the cost of cigarettes 50%, smoking rates plummeted sharply. Today, less than 20 percent of Americans are smokers compared to the 42% in the 1960s before it was taxed. (…….) Although this tax would give our Government a considerable amount of power the results could transform our society substantially. “Economists generally agree that government intervention, including taxation, is justified when the market fails to provide the optimum amount of good for society’s well-being,” says Oliver Mytton, co-author of a recent report in the British Medical Journal. This is a controversial topic but a 2010 poll by the Quinnipiac University polling institute found that, “76% of New York residents favor a tax on soft drinks while only the remaining 22% are against the notion.

The economic literature on the effectiveness of laws that try to reduce smoking is wide. Previous studies include price change and increases in excise tax on

By imposing the minimum tax, the base and value cigarettes producers will be forced to choose between two alternatives equally disadvantageous to them: either they sell at a lower price, and they lose, or they sell at the minimum price of 2.6 RON, and their sales go down. Due to this, their autonomy is affected, and also the freedom of trade (art. 9). The consumer has a limited possibility to choose and is forced to accept a higher price for a base or value product, which affects his/her welfare. The welfare of the end user is assured by the quantitative,

Despite the arguments declared, there are many citizens in today's society who feels that the production and sale of cigarettes can help boost up a country's economy. Due to high taxes paid for cigarettes, more cash from sales of the product would go to the importing country instead of the producing country. Sequentially, the purchase of cigarettes can be controlled and reduced at the same time. However, only a minority of individuals would quit smoking and enjoy a healthy life. On the contrary, the majority of smokers would continue to linger in the pleasures of smoking without taking into consideration of the price as they are addicts of cigarettes. In addition, the issue of high economy would contradict to the various methods to prevent smoking as shown by commercials and advertisements in the media. With cigarettes