Inelastic Demand Of Cigarettes

Theoretically,(2) frequently advertised,(3) and commonly assumed by users,(4-12) this process avoids the harmful byproducts of combustible tobacco. Moreover, users cite considerable financial savings(4,5) using e-cigarettes over combustible cigarettes – i.e. $846 per year compared to $2190.(13) E-cigarettes are often marketed as a way to beat public smoking restrictions,(3) and users frequently claim this as one reason for consumption.(5,14)

This article is very informative toward the purpose of increasing excise taxes. I believe that Joey Connor did an excellent job at pointing out the effects of the tax increase on tobacco products. He provided information on previous tax rates, so readers can have a clear idea of the increase percentage of taxes. He also supported his arguments by incorporating other sources in his article. For instance, he incorporated the analysis done by the National Public Radio on how the increase in price of cigarettes will affect the consumer behavior.

Elasticity of demand is a measure of responsiveness to a price change of a good or service. When demand is elastic, the percentage of a price change of a product will result in a larger percentage of quantity demanded (McConnell, p 77). It basically means reducing the price of a good service will result in a greater quantity demanded and an increase in revenue for the seller. When demand is inelastic, a change in price will result in a reduction of quantity demanded, which will then lead to a revenue decrease (McConnell, p 77). To demonstrate elastic and inelastic demand results, Company A sells 100 pens at $1.00 a piece each day, making their revenue $100.00. Company A

History has proven that government penalties, in the form of taxes, deter smoking. The 2000 U.S. Surgeon General’s Report, Reducing Tobacco Use, found that raising tobacco-product prices decreases the prevalence of tobacco use, and tobacco tax increases produce significant long-term improvements in health. From its review of existing research, the report concluded that raising tobacco taxes is one of the most effective tobacco prevention and control strategies (7). Along with price increases, mass-media campaigns and smoking bans have made cigarette smoking pretty much unacceptable in today’s society. “Today, approximately 22 percent of adults age twenty-two and older are smokers, compared with 33 percent in 1979” (Thorpe 1440). It is clear, from these examples, the use of penalties to deter the unhealthy behavior of smoking is a successful intervention.

(c) What is the effect of cigarette taxes (and smuggling) on the consumption of alcohol? What does that imply about the cross elasticity of demand between the two?

Smoking, one of America's favorite pastimes, has fallen under constant fire from legislators who are contending that electronic cigarettes are not only as harmful as their non-electric counterparts, but that the former ought to be regulated as tobacco products. The cases made upon either side stand firm, though legislators find themselves splitting hairs defining upon what is and is not a tobacco product, with vaporizers being such intricate pieces of technology, with only portions of which contain nicotine. The case against the vaporizer stands that while they help users of traditional tobacco kick the habit, they leave an addiction to nicotine, fueling the economy of the vaporizer instead of that of big tobacco. While many will denounce

One microeconomic concept Proposition 56 relates to is supply, demand, and equilibrium. Taxes imposed by the government reduce both demand and supply, and cause the market equilibrium to increase and quantity to decrease. Consumers will not want to purchase because of the increase in

The topic of this paper is Gasoline prices and potentially higher state sales tax. According to Stephen Singer’s article (2017, August 24); Connecticut legislators are deciding to raise the state sales tax and gas prices from its current rate to 6.85% to close a budget gap that’s predicted to reach $3.5 billion over two years to help lower state aid cut to towns. I disagree with the decision the legislatures of Connecticut are making to fix a budget gap with higher taxes on retail products and gasoline prices because increasing the prices of these products with higher taxes would increase the price of consumer goods and services. According to the law of demand and the law of supply, when there is an

Lastly, the rise of E-cigarettes may lead to Big Tobacco companies gaining larger influence and a new strong market. Big Tobacco companies are beginning to invest in E-cigarettes and since they are larger and wealthier than many smaller companies who deal E-cigarette products, they might have the ability to strongarm them into submission. Once Big Tobacco companies take control of the market they would once more have a foothold over society. Big tobacco companies should not be allowed to gain such strength since their market is in products which are toxic and ruinous to people.

“E-cigarettes have become increasingly popular, particularly among young people” (“E-Cigarettes”). These people argue that the growing popularity of e-cigarettes among teens can increase misuse and accidents with e-cigarettes, putting more young people in danger. However, e-cigarettes are actually keeping young people away from much more dangerous alternatives. “Statistics suggest teens are now more likely to use e-cigarettes than tobacco cigarettes” (“E-Cigarettes”). Tobacco cigarettes are much more harmful to people then e-cigarettes are, and e-cigarettes are driving young people away from tobacco cigarettes. Furthermore, “It is unknown how harmful e-cigarettes are to your health” (“E-Cigarettes”). Although e-cigarettes health effects are unknown, it’s highly likely they are much better for people compared to tobacco cigarettes, especially because they don’t have the cancer causing smoke that tobacco cigarettes have. Without the cancer causing smoke, young people have no risk of getting cancer from using an e-cigarette. Additionally, smoking e-cigarettes costs a lot less than smoking tobacco cigarettes. “The cost of e-cigarettes a month is about half the cost of tobacco cigarettes a month” (“eversmoke”). Although this fact has already been addressed, it’s too important to young people. Young people don’t make a lot of money, so the reduced cost of using e-cigarettes compared to the raised cost of using

9. If the demand for a good is perfectly price inelastic in the short run and the supply curve is upward sloping, imposing a sales tax on the good will

The three goods for which the demand is inelastic is gasoline, electricity and medical procedure. The reason why they are inelastic is because if the prices for these three goods increase significantly the consumers buying behavior is unchanged and the quantity demand is not affected. Furthermore, these good would never go on sale because consumers have fewer options and it a necessity that people can’t live without. I don’t see a reason for putting gasoline for example on sale because if you lower the price of this good nothing will change everything stays the same. I think the relationship between elasticity and total revenue does help me understand why some goods go sale and why others don’t because elasticity looks at the impact of price

I have chosen cigarettes to be my market transaction as it is has a very large and wide market. A cigarette is a product consumed through smoking and manufactured out of cured and finely cut tobacco leaves and reconstituted tobacco, often combined with other additives1,

Changes to indirect taxes in particular can have an effect on the pattern of demand for goods and services. For example, the rising value of duty on cigarettes and alcohol is designed to cause a substitution effect among consumers and thereby reduce the demand for what are perceived as “de-merit goods”. In contrast, a government financial subsidy to producers has the effect of reducing their costs of production, lowering the market price and encouraging an expansion of demand.

Elasticity of demand represented as “Ed” is defined as a “measure of the response of a consumer to a change in price on the quantity demanded of a good” (McConnell, 2012). Determinants for elasticity of demand would include the substitutability of a good, proportion of a consumer 's income spent on a good, the nature of the necessity of a good and the time a purchase is under consideration by the consumer. Furthermore, elasticity of demand is calculated with this formula: