Answered: Some have argued that higher cigarette…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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?

Disagree - the reduction in demand will push the equilibrium price below its original level.
Disagree - this confuses a change in demand with a change in quantity demanded.
Agree - the price increase will ultimately leave cigarette consumption unchanged.
Disagree - higher cigarette prices will actually increase the demand for cigarettes.

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