Two Ways To Reduce The Quantity Of Smoking Demanded

Public policymakers often want to reduce the amount that people smoke. There are two ways that policy can attempt to achieve this goal.

One way to reduce smoking is to shift the demand curve for cigarettes and other tobacco products. Public service announcements, mandatory health warnings on cigarette packages, and the prohibition of cigarette advertising on television are all policies aimed at reducing the quantity of cigarettes demanded at any given price. If successful, these policies shift the demand curve for cigarettes to the left, as in panel (a) of Figure 4-4.

Alternatively, policymakers can try to raise the price of cigarettes. If the government taxes the manufacture of cigarettes, for example, cigarette companies pass much of this tax on to consumers in the form of higher prices. A higher price encourages smokers to reduce the numbers of cigarettes they smoke. In this case, the reduced amount of smoking does not represent a shift in the demand curve. Instead, it represents a movement along the same demand curve to a point with a higher price and lower quantity, as in panel (b) of Figure 4-4.

How much does the amount of smoking respond to changes in the price of cigarettes? Economists have attempted to answer this question by studying what happens when the tax on cigarettes changes. They have found that a 10 percent increase in the price causes a 4 percent reduction in the quantity demanded. Teenagers are found to be especially sensitive to the price of cigarettes: A10 percent increase in the price causes a 12 percent drop in teenage smoking.

A related question is how the price of cigarettes affects the demand for illicit drugs, such as marijuana. Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes, so that high cigarette prices encourage marijuana use. By contrast, many experts on substance abuse view tobacco as a "gateway drug" leading the young to experiment with other harmful substances. Most studies of the data are consistent with this view: They find that lower cigarette prices are associated with greater use of marijuana. In other words, tobacco and marijuana appear to be complements rather than substitutes.

What is the best way to stop this?

Figure 4-4

Shifts in the Demand Curve versus Movements along the Demand Curve. If warnings on cigarette packages convince smokers to smoke less, the demand curve for cigarettes shifts to the left. In panel (a), the demand curve shifts from D1 to D2. At a price of $2 per pack, the quantity demanded falls from 20 to 10 cigarettes per day, as reflected by the shift from point A to point B. By contrast, if a tax raises the price of cigarettes, the demand curve does not shift. Instead, we observe a movement to a different point on the demand curve. In panel (b), when the price rises from $2 to $4, the quantity demanded falls from 20 to 12 cigarettes per day, as reflected by the movement from point A to point C.

(a) A Shift in the Demand Curve

(a) A Shift in the Demand Curve

Cigarette Demand Curve

0 10 - 20 Number of Cigarettes

Smoked per Day

0 10 - 20 Number of Cigarettes

Smoked per Day

(b) A Movement along the Demand Curve

(b) A Movement along the Demand Curve

Supply For Cigarettes Graph
Smoked per Day

QUICK QUIZ: List the determinants of the quantity of pizza you demand. ♦ Make up an example of a demand schedule for pizza, and graph the implied demand curve. ♦ Give an example of something that would shift this demand curve. ♦ Would a change in the price of pizza shift this demand curve?

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