Can increasing the prices of cigarettes decrease the consumption of cigarettes? Please contribute your thoughts based on published research you may read and your understanding of price elasticity of demand. Ideally, keep your post to a maximum of 4 paragraphs.
In a free-market economy, the forces of demand and supply not only determine output and prices but also indirectly influence wages and employment. When we study the concepts of demand and supply in detail, it becomes apparent to us that when relevant exogenous factors, such as taste-consumption-economic conditions, change, a shift in demand/supply occurs. For instance, when the size of consumption increases in an economy the demand curve shifts to the right. It is imperative to comprehend that change in the price of a product, or a service brings changes in its quantity demanded/supplied (because of a change in price supply/demand curve does not shift because the price is an indigenous factor) (Dixit, 2014).
We learn that for a normal good, the price is negatively related to quantity demanded. It means that when price increases, the quantity demanded the normal decreases and vice versa. However, the size of the change in the quantity demanded solely depends upon the price elasticity of demand. For instance, when a product is preferred and desired strongly, the fluctuation in price (upwards, especially) does not affect the quantity demanded. Similarly, when a product does not have many substitutes, the change in the price of that product does not strongly affect the quantity demanded (less price elastic). It suggests that the demand curve for the goods and services that are preferred or that have few substitutes are steep. However, the products/services that are less preferred or have many close substitutes are more prices elastic, and their demand curve is flat (Dixit, 2014).
From the studies, it is apparent that the demand for cigarettes is steep. It is because studies have concluded that smoking is an addiction, which makes it demand curve for the cigarettes steep. It also suggests that with the increase in price, because of tax or other measures that aim to reduce the consumption of cigarettes, the quantity demanded of the product will not change much. Different studies have suggested that when people become health conscious, the demand for the products that deteriorate health in the short and long runs shift to the left (exogenous factor). The direct tax that intends to reduce the quantity demanded or indirect tax that aims to shift the demand curve for the cigarettes to the left usually fail to produce desired results. The strategies that are only based on extrinsic incentives only produce results in the short run. It is also imperative to acknowledge that smoking is a habit and to discourage that habit a comprehensive strategy is required that not just focuses on extrinsic incentives that crowd-out personal/genuine motivations against smoking (Fathelrahman, et al., 2010).
From the systematic scrutiny of literature, about the consumption of cigarettes, it is apparent that an increase in price cannot discourage the consumption of cigarettes to the desired level. It is because smoking is an addiction, which is why consumption behavior about cigarettes is hard to change by increasing the price of the product. However, through awareness campaigns, which intensify personal motivations to act in a certain fashion, can produce desired results. However, such a strategy is hard to devise and implement. Also, such strategies take enormous time to produce the results that are desired. Therefore, contemporary studies suggest a mix of incentives, punitive actions (imposing of tax) and awareness campaign (regarding the risks that are associated with smoking).
References
Dixit, A. (2014). Microeconomics: A Very Short Introduction (2 ed.). OUP Oxford.
Fathelrahman, A. I., Omar, M., Awang, R., Cummings, K. M., Borland, R., & Bin Mohd Samin, A. S. (2010). Impact of the new Malaysian cigarette pack warnings on smokers’ awareness of health risks and interest in quitting smoking. International Journal of Environmental Research and Public Health, 7(11), 4089-4099.
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