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 j other tobacco products. Public service announcements, mandatory health warn- < uigs on cigarette packages, and the prohibition of cigarette advertising on televi- J skm arc all policies aimed at reducing the quantity of cigarettes demanded at any What it rw but way to given price If successful, these policies sh ift the demand curve for cigarettes to the 00* tws? left, as in panel (a) of Figure 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 A.
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 arc found to be especially sensitive to the price of cigarettes: A 10 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 arc 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 latter view: They find that lower cigarette prices are associated with greater use of marijuana. In other words, tobacco and marijuana appear lo be complements rather than substitutes. •
QUICK QUIZ Mate up An example of .1 monthly demand schedule for pirea and graph the Implied demand curve. • Give an example of something that woiVd shift this demand curve, and briefly explain your reasoning. • Would a change in the price of pitta shift this demand curve?
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