Effects of Taxation on Cigarette Smoking Essay
In economics the demand elasticity refers to the sensitivity of the quantity demand for a product to the changes in price. This relationship correlates to the basic law of demand which states that if the price of a product or good increase, then the consumer demand would fall and decrease because of the change. However not all products follow this fundamental theory. In fact products that are considered addictive substances, such as tobacco and cigarettes can be the exception to this basic law because we must take into account not just the pricing but other factors such as time, usage, limitations, and restrictions.
Imposing higher taxes on cigarettes will have a mix effect as to who the …show more content…
Studies have shown that smoking cigarette or second hand smoke and the use of tobacco products can led to lung, tongue and mouth cancer. In order to have a greater effect in reducing cancer, government, local and city, will need to impose taxes on other products that have the same addictive substance, nicotine. These goods or products are considered substitutes for cigarettes. An example of a substitute would be smokeless tobacco such as stuff and chewing tobacco; where the nicotine is absorbed into the bloodstream through the tissues in your mouth.
It is important to understand that products which are necessities will more likely be insensitive to price changes because despite the price increase, consumers would still buy them. So in order to get consumers to change their habits, products that are complimentary should forego price adjustments to decrease the product. Some reasonable complimentary product for tobacco could be products made with sugar, i.e. soda, candy and gum. These are not products essential to daily life, but they could be considered more of a necessity to a consumer in their life if one is trying to reduce or quite smoking. By making changes in their lifestyle, as well as satisfying ones oral habits in other ways such as sucking on candy or chewing sugarless gum.