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Case Study in Demand Elasticity

This study analyzes the effects of price increases on cigarette demand elasticity across various markets. It explores historical data from 1970 to 2007, examining how U.S. cigarette prices influence consumption patterns. Notably, it discusses the correlation between price and quantity demanded, anti-smoking campaigns, and the impact of advertising prohibitions. Additionally, findings highlight how a more elastic demand curve can lead to significant shifts in consumption when prices rise. The case study provides insights relevant to public health policies and tobacco regulation.

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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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