Reference no: EM133390140

Case: Some have argued that higher cigarette prices do not deter smoking. While there are many arguments both for and against this view, some find the following argument to be the most persuasive of all: "The laws of supply and demand indicate that higher prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce the demand for cigarettes. This reduction in demand will push the equilibrium price back down to its original level. Since the equilibrium price will remain unchanged, smokers will consume the same number of cigarettes."

Do you agree or disagree with this view? Discuss and explain your answer with your partner.

Ting Fang Cheng:

There is evidence to suggest that higher cigarette prices can deter smoking. While it is true that the laws of supply and demand can affect the equilibrium price of a product, it is not necessarily the case that higher prices will always result in a return to the original level of demand.

One of the key factors that can influence the effectiveness of higher cigarette prices in reducing smoking is the elasticity of demand for cigarettes. If the demand for cigarettes is inelastic, then an increase in price may not result in a significant reduction in the number of cigarettes consumed. However, if the demand for cigarettes is elastic, then an increase in price could lead to a significant reduction in the number of cigarettes consumed.

There is evidence to suggest that the demand for cigarettes is relatively elastic, especially among younger and lower income individuals who are more sensitive to changes in price. Studies have shown that higher cigarette prices can lead to a reduction in the number of cigarettes consumed, particularly among these groups.

In addition to the elasticity of demand, other factors can also influence the effectiveness of higher cigarette prices in reducing smoking. These can include the availability of alternative nicotine products, such as electronic cigarettes, and the strength of anti-smoking campaigns and policies.

Overall, while the laws of supply and demand can affect the equilibrium price of cigarettes, there are other factors at play that can impact the effectiveness of higher cigarette prices in reducing smoking. As such, it is not accurate to say that higher cigarette prices are necessarily ineffective in reducing smoking.

Shichen Liu:

From my point of view, this should be discussed case by case. Some people hold the views that higher cigarette prices do not deter smoking. The theory makes sense to some degree because cigarette is treated as essential to those who are addicted to smoking, in other words cigarette is viewed as their necessities, no matter how high the price would be, those frequent smokers would buy them anyway, just like the way we have to purchase those consumables such as toilet paper, tissue, we can't live without those goods in our life, same as cigarette to frequent smokers. Therefore, it makes sense to think rising the cigarette price would not be helpful in reducing smoking.

However, as mentioned above this should be discussed case by case, because not all smokers are frequent smokers who are highly reliant on smoking physically and mentally. There are some smokers who don't smoke that much, or to say only smoke once a while when they feel stressed out or depressed, or they are even just social smokers, only smoking when they socialize. In such a scenario, raising the cigarette price would be somewhat effective in stopping those groups of less-frequent smokers who smoke because cigarettes are not treated as essential, but non-essential goods.Those group of smokers are more sensitive to pricing if the price goes really high, they would start to evaluate if they would really need the cigarette to relieve stress or socialize people.

Therefore, I think that all comes to the theory that how the pricing would impact the demand of a good, it highly depends on whether the goods are treated as essential or non-essential goods to the customers