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Case Study in Demand Elasticity

Case Study in Demand Elasticity. The Market for Cigarettes. Cigarettes: Effect of Price Increase on Demand. C. $4.00. 15. $/pack. $2.00. A. D 1. 0. 20. Packs/day (millions). 2012 Cigarette Prices (US $). Cigarette Prices Around the World.

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Case Study in Demand Elasticity

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  1. Case Study in Demand Elasticity The Market for Cigarettes

  2. Cigarettes: Effect of Price Increase on Demand C $4.00 15 $/pack $2.00 A D1 0 20 Packs/day (millions)

  3. 2012 Cigarette Prices (US$)

  4. Cigarette Prices Around the World http://www.tobaccoatlas.org/costs/cig_prices/prices/

  5. US Cigarette Price vs. Consumption Billions of packs/year Price/pack

  6. Estimating US Demand Elasticity for Cigarettes Year 1970 2007 Quantity billions of packs/year 27 17 Price ($2007/pack) $1.75 $4.25

  7. Prohibition Against Cigarette Advertising

  8. Exceptions

  9. Anti-Smoking Adveritising IN FRANCE IN ITALY

  10. Cigarette Packaging in Canada

  11. Anti Smoking Laws LegalAge • Spain, Italy, Holland: 16 • France: 18

  12. Anti-Smoking Laws

  13. Scope of Anti-Smoking Campaign: Shift Demand Curve Price/ pack Decrease in demand D1 D2 0 Packs per day(mill)

  14. Scope of Anti-Smoking Campaign: FlattenDemand Curve $/pack If the demand curve is flatter (more elastic) the sameincrease in price will case a greater reduction in demand D2 D1 0 Packs/day (millions)

  15. References http://www.hc-sc.gc.ca/hc-ps/tobac-tabac/legislation/label-etiquette/graph/index-eng.php http://www.tobaccoatlas.org/costs/cig_prices/prices/ http://www.imf.org/external/pubs/ft/fandd/1999/12/jha.htm http://www.cdc.gov/tobacco/data_statistics/tables/economics/trends/index.htm http://tobaccocontrol.bmj.com/content/11/suppl_1/i62.full

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