List the strategies used to affect demand for cigarettes and how it would affect smoking(use diagrams to explain your answer). (15 marks)

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. Governments are trying to influence the market of cigarettes so that people reduce smoking.

a) List the strategies used to affect demand for cigarettes and how it would affect smoking(use diagrams to explain your answer). (15 marks)

Governments are trying to affect demand for cigarettes by implying strategies to

real action such as increasing the import duty, putting up advertisements against

smoking and hosting campaigns and projects to curb smoking activities.

In the graph, assume that the demand curve is static, on supply curve S0 and demand

curve D0, the quantity demanded is 30 packs when the price of cigarettes per pack is

RM 2. By increasing the import duty, putting up anti-smoking banners and hosting

campaigns, the quantity of supply demanded by the sellers will decrease because

they use the same amount of money in exchange for a lesser amount of cigarettes.

From the graph, this particular action from them caused the supply curve to shift to

the left from S0 to S1, with the quantity demanded decreased to 20 packs when the

price of cigarettes per pack raise to RM 2.50. If the government runs tighter controls

over cigarette imports, then the supply curve will shift to the left even more, that is

from S1 to S2 with reference to the graph, with the quantity demanded is 10 packs

when the price of cigarettes per pack is RM 3. With this the government hopes that

with the increase of price in cigarettes while the quantity supplied in the market

remains constant, ceteris paribus, the community will tend to attempt to give up

smoking and thus causing a decrease in demand for cigarettes.

1b) List the factors that affect supply and how that would affect the market of

cigarettes(use diagrams to explain your answer). (5 marks)

2. What is price elasticity of demand? Why is it so important in economics? (5marks)

Price elasticity of demand is the ratio of the percentage change in the quantity demanded of a product to a percentage change in its price. Price elasticity of demand is very important in economics because it ensures the suppliers to know the change of quantity demanded when there is an adjustment in price. By using price elasticity of demand, producers able to set up the price and also target markets for their goods and services. Therefore, they will not face any trouble in this.
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3a) According to the article, what factors influence price elasticity of demand for

cigarettes? (15 marks)

According to the article, one of the factors which influence price elasticity of demand for cigarettes is gender. Women are more responsive to the price changing. Besides, education also influences price elasticity of demand for cigarettes. Less educated adults are more responsive to price changes than better-educated adults. Individuals with less than a high school education were estimated to have a long run price elasticity of demand of 0.60. However, individuals with more years of education were found to be ...

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