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Please read the article below by ABC journalist Ashley Hall dated 29 th April 2010 Cigarette tax hike sparks panic buying and identify TWO (2) economic issues you found interesting.

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Introduction

Discussions 1: The following guidelines will underpin your contributions:- � demonstrate your knowledge of the topic in relation to relevant economic theories/concepts � Effectively convey your thoughts, opinions and ideas � provide evidence of relevant further readings, especially from academic journals -Economists magazine � incorporate your own work and personal experience, and � adhere to the minimum contribution guidelines presented below Minimum/Maximum Contribution Guidelines Prior to the discussion opening, � read the relevant chapters in your text book � Research the topic through further reading of relevant academic journal articles � look for examples of its practical application. Look at the questions that are being asked, make an informed judgment about what would constitute a reasonable answer, and then make your entry. Quality is important and is one of the criteria that is being used to assess your contribution. Long rambling entries are discouraged. BE SUCCINCT. Your initial comments are a short, sharp synopsis (aim for about 400 words) of your research and your views/thoughts on that research as they relate to the topic. Please read the article below by ABC journalist Ashley Hall dated 29 th April 2010 Cigarette tax hike sparks panic buying and identify TWO (2) economic issues you found interesting. Through the discussion board forum explain the significance of these issues (with reference to theory of course!). Having identified two issues join the discussion forum and make at least TWO (2) meaningful reflections on the contributions of others. You are encouraged to include relevant diagrams in your various discussions. ...read more.

Middle

The price increase of cigarettes will be more sensitive for lower income earners such as teenagers who have limited affordability. Adults who earn more money and have a longer dependency on smoking will continue to purchase the cigarettes. This is the case for my older colleges at work who put cigarettes at a higher value than the price they pay due to their addiction. Also it will take some time for consumers to feel they have hit their budget line and no longer can afford the cigarettes. This is when you start seeing consumers regularly borrowing cigarettes from each other. The limitation when analysing price elasticity of demand is the volume of illicit cigarettes that is not accounted. Generally an increase in tax would give incentives for individuals to purchase cigarettes in the black market or through duty free where illicit markets can evade tax. On the flip side, the extra tax earned from the cigarettes would also make law enforcement more effective. The impact of restricting cigarette advertisements and promoting anti smoking campaigns is to decrease market size through reduction of proliferation. Based on the economic concept of diminishing marginal product, promoting anti smoking advertisements become ineffective after awhile because response to the advertisements will only work to a certain point and the responsiveness to cigarette consumption will flat line and start declining (graph 1.1 attached). The principle would apply, to smoking campaigns as well. This concept reinforces why there isn't a significant reduction in cigarette consumption with partial bands on advertising. ...read more.

Conclusion

"It's a massive hit. It's expecting everyone to go cold turkey overnight really and I think the first thing we'll see is the majority of people, because it's an addictive drug, will continue to smoke, he said. "We'll see an immediate impact. In fact we'll have an increase in people seeking assistance. "We shouldn't rush to make value judgments here either, because as I mentioned it is an addictive drug, but there's also the psychological factors that go along with smoking. "For many people, their 10-minute cigarette on the back porch is their only reprieve from an otherwise very oppressive existence, if you like." But Quit Victoria executive director Fiona Sharkie estimates that 100,000 people will quit smoking as the result of the price increase and 25,000 children will not take up the habit. "This is a concern that we hear from time to time and we can well appreciate that the social services groups who do such a great job may have this concern," she said. "In fact, people from low-income groups are 13 times more likely to quit smoking in the face of a price increase than those from higher income groups. So it actually does work. "It's a pretty immediate effect. So when we say 100,000 less smokers, that's pretty immediate." She says a smoker would only have to cut their habit by two cigarettes a day to keep their budget in balance and that people from lower socio-economic communities have as much right to live a lengthy and healthy life as those from a wealthier background. Tags: business-economics-and-finance, industry, federal-government, tax, smoking, australia First posted Thu Apr 29, 2010 7:46pm AEST ?? ?? ?? ?? ...read more.

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