What Is Cigarette Price Inelastic?

In the past decades, an increasing number of countries have imposed a ban on smoking in public places, including restaurants and bars. Unlike other regulations of cigarettes such as tax or promoting ban, this territorial smoking control sparked heated debates. While some argue that the implementation of this regulation is inefficient and reduce the public welfare (Viscusi, 1994; Tollison and Wagner, 1992; Lambert, 2006), others claim that smokers do impose negative externalities to both non-smokers and themselves (Gravelle and Zimmerman, 1994; Hanson and Logue, 1998).

In the article ‘Cigarette tax hike sparks panic buying’, Hall (2010) discusses the effects of tax increase on cigarettes. The government has decided to raise the tax on cigarettes by 25%, costing $2.16 more on a pack of 30 cigarettes. This government intervention is an attempt to stop people from smoking and reduce the health bill caused by those who smoke. The increase in tax is expected to save $5 billion more of the people’s tax dollars and the government decided that it will be put into a better use for its health and hospitals reparations. This contractionary fiscal policy is expected to reduce the total tobacco consumption by approximately six percent and drive down the number of smokers by 87,000.

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

The establishment of a cigarette tax policy would contribute to the reduction of cigarette consumption, because the equilibrium price of the market would increase and considering the consumer's budget constraint, the quantity demanded would decrease. In this sense, the demand model is optimal to represent the establishment of this policy and the reduction of cigarette consumption as a consequence. Because this model specifies the demand equation so that the quantity of cigarettes demanded is a function of cigarette prices, consumer income, and tax policies.

A dangerous product that can kill a human every second around the world and can carry a large cost for families and their treatment for diseases such as cancer and heart disease is caused by the product called tobacco. Tobacco-related diseases and deaths can affect smokers’ lives at an early stage and cause a decline in productivity and income. Smoking will not only affect the person’s life, but will also affect people around him or her by causing many diseases. Nicotine found in cigarettes is a strong addiction, substance equal to heroin and cocaine; therefore, it will be difficult to quit smoking, but to convince smokers to get rid of the smoking habit, governments can raise tobacco products’ taxation, make users pay higher health insurance premiums, and make smokers pay a health tax.

Rise in price will see a greater quantity supplied (quantity will rise), shift in supply curve. (McTaggart, 2010), (Layton, 2009).

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.

Smoking charges directly to the income of smokers and Vietnamese smokers totally paid approximately VND14,000 billion for tobacco. In addition, tobacco use also imposes a

Increase taxes: In 2009 The Family Smoking Prevention and Tobacco Control Act was passed authorizing the Food and Drug Administration to regulate tobacco products. It also preserves the traditional role that state and local governments have in trying to reduce tobacco use. Most states have incrementaly raised their excise taxes, specifically for cigarettes in the form of a unit tax, which is based on a constant nominal rate per unit or pack of cigarettes. States and more recently the federal government have increased tobacco taxes, both to decrease tobacco use and to generate revenue.

The overall economic costs of smoking cigarettes has become somewhat of an epidemic in society for a variety of reasons. It includes numerous private and social costs. The private cost to smokers goes far beyond the price of cigarettes alone. Smokers also pay with their health, life, and finances. Alongside the great cost to smokers, they enjoy benefits to the same degree. The total cost of smoking not only effects smokers, but society as well. The externalities from smoking are both negative and positive. Society bears the burden of the negative externalities, or social costs, both physically and monetarily. The positive externalities, or social benefits, play a significant economic role in society. The tobacco

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.

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.

The marginal benefit and marginal cost of cigarettes are in competitive market equilibrium without government intervention, however, the negative social cost of smoking to society would likely lead to market failure without the involvement of the government (reference). Tobacco not only affects the health of its consumers, it can also affect the health of non-smokers who involuntarily inhale second-hand smoke (reference). With the continuation of tobacco consumption, society faces increased tax rates, a loss of productivity and an opportunity cost from patients suffering tobacco-induced health problems, potentially robbing others with unpreventable conditions from the medical resources and treatment they require. Each year Australians spend

- The Increase of the Unit Price for Tobacco Product: this recommendation is based on an intervention that consisted in the increase of tobacco product price by 20%. With that increase, the overall consumption of products derived from tobacco was decreased by 10.4%, the use among adult was reduced by 3.6%, and finally it decreased the initiation of tobacco use by young people by 8.6%.Economic evidences also suggested that the increase helped save money in healthcare cost ranging from -$0.14 to $90.02 per person in a year. In the meantime, some studies showed an increase in healthcare cost because people were living longer than expected after they quit smoking. (Community Preventative Services Task Force)

For students the most direct impact of smoking is that smoking is negatively related to students’ school performance. The results of poor academic achievement dose not reduce students’ self-confidence, but also affect their future employment status. On the other hand, the opportunity cost of smoking is much expensive than other habit. Based on University of Texas’ calculation , the annual cost on smoking for pack-a-day habit is about 3720 US dollars, which includes insurance cost, health care cost and etc.. Nevertheless, the cost in Canada should be much higher because the average price for a pack of cigarette in the US is only $6 but $10 in Canada. Besides, the currency exchange rate and price index will grow up the expenses for