Principles of Microeconomics
11th Edition
ISBN: 9780133024630
Author: CASE
Publisher: PEARSON
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Question
Chapter 3, Problem 6P
To determine
Illustration of market for cigarettes.
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Students have asked these similar questions
The U.S. government administers two programs that affect the
market for cigarettes. Media campaigns and labeling requirements
are aimed at making the public aware of the health dangers of
cigarettes. At the same time, the Department of Agriculture
maintains price supports for tobacco. Under this program, the
supported price is above the market equilibrium price and the
government limits the amount of land that can be devoted to tobacco
production. Are these two programs at odds with the goal of
reducing cigarette consumption? As part of your answer, illustrate
graphically the effects of both policies on the market for cigarettes.
Some have argued that higher cigarette prices do not deter smoking. While there are many arguments both for and against this view, some find the following argument to be the most persuasive of all: “The laws of supply and demand indicate that higher prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce the demand for cigarettes. This reduction in demand will push the equilibrium price back down to its original level. Since the equilibrium price will remain unchanged, smokers will consume the same number of cigarettes.”Do you agree or disagree with this view?
Disagree - the reduction in demand will push the equilibrium price below its original level.
Disagree - this confuses a change in demand with a change in quantity demanded.
Agree - the price increase will ultimately leave cigarette consumption unchanged.
Disagree - higher cigarette prices will actually increase the demand for cigarettes.
Some have argued that higher cigarette prices do not deter smoking. While there are many arguments both for and against this view, some find the following argument to be the most persuasive of all: “The laws of supply and demand indicate that higher prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce the demand for cigarettes. This reduction in demand will push the equilibrium price back down to its original level. Since the equilibrium price will remain unchanged, smokers will consume the same number of cigarettes.”
Do you agree or disagree with this view?
Chapter 3 Solutions
Principles of Microeconomics
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Similar questions
- The Trinidad and Tobago government administers two programs that affect the market for cigarettes. Advertisements and labeling requirements which are aimed at making the public aware of the dangers of cigarettes. At the same time, the Ministry of Agriculture limits the amount of land that can be devoted to tobacco production. Are these two programs useful in the goal of reducing cigarette consumption? As part of your answer, illustrate graphically the effects of both policies on the market for cigarettes.arrow_forwardThe following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes. In this market, the equilibrium price is $_________ per box, and the equilibrium quantity of oranges is ________ million boxes. For each price listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls. pressure on prices options: upward, downward Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges. Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result…arrow_forwardIn the market for computers, the number of computer producers increases. At the same time, people’s income increase, and computers are a Normal Good. What would you predict happens to the equilibrium price and quantity in the market for computers? The equilibrium price decreases, and the change in equilibrium quantity is ambiguous The equilibrium price increases, and the change in equilibrium quantity is ambiguous The change in equilibrium price is ambiguous, and the equilibrium quantity decreases The change in equilibrium price is ambiguous, and the equilibrium quantity increasesarrow_forward
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