Bsb113 Economics Essay

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   Research Summary    Research Summary BSB113 BSB113 Tutor: Thamarasi Kularatne Tutor: Thamarasi Kularatne Student Number: N9138587 Student Number: N9138587 Carson Ly Carson Ly Due Date: September 26 2014 ndjdcjjdjdj2012012222014 Due Date: September 26 2014 ndjdcjjdjdj2012012222014 Smoking is recognised as the largest single preventable cause of death and disease in Australia. It is associated with an increased risk of heart disease, stroke, cancer, emphysema,

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The consumption of cigarettes has reduced over the years by 6.8%. In 2012, 17.4% of Australia were recorded as smokers (Heart foundation, 2012). This reduction is caused by the increase of price over the years, as the price increases, the demand for cigarettes decreases. Figure 1 shows the smoking rates of the years 2001-2012.

Figure 1

Figure 1



The amount of smoking of cigarettes is decreasing in Australia. This is because of the tax increase of cigarettes in Australia, which then increases the price. Therefore the demand for cigarettes decreases whilst the supply stays the same. Due to the price increasing, the amount of cigarettes sold will decrease. Using this information a supply demand graph can be constructed. If the price were to decrease the demand for cigarettes would increase, causing a shift to the right, but because this is not the case, there is instead a shift to the left. Figure 2 shows the shift to the left causing efficient equilibrium.

Figure 2

Figure 2



Efficient equilibrium

Efficient equilibrium



Price

Price

S2 S1



P2

P1



D

Quantity

Quantity

Q2 Q1



There are a couple strategies to get an efficient equilibrium. One of these strategies being price floor, due to the fact that Australia will never have 0% of smokers in Australia, and also because
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