News article:
Summary
This news article talks about a price increase in cigarettes in order to finance public wage increases. Brands such as Marlboro and Rothmands will be increased in the price but the question was, will it affect people? They are predicting that the price movements won't affect people since the demand of the cigarettes are not affected due to it being inelastic. Since the smokers are addicted and smoke as a habit, they will learn to accept the price change. The revenues for the company will be higher for the tobacco industries.
Connections
The obvious connection in this article is the inelasticity of the cigarettes. People who are addicted to cigarettes won't care if the cigarettes price increases. Although the cigarettes may not seem like a neccessity, to some it may be. The demand of the product will slightly decrease. People will "try" to quit, or decrease the amount of cigarettes smoked in a day. The companies will be able to produce more cigarettes with more money, but they will have the same amount of consumers. The same can be said for things like alcohol and drugs or any addictive product.
Personal Reflection
Smoking is horrible. The government did a good thing by increasing the price in the cigarettes. Adding a government regulation will decrease the amount of smokers, but unfortunately, according to this article, the cigarettes became a neccesity and it is inelastic. The government should offer more things like a ban on cigarettes because tobacco is harmful to the liver. Canada can learn from this article and take action by adding more government regulations which will decrease the demand of cigarettes. But of course, the actions have to be smart or else it won't work.
Subscribe to:
Post Comments (Atom)
2 comments:
As much as I hate to admit it, you are right about the relative inelasticity nature of cigarettes!
Although I do want to point out that those who smoke cigarettes occasionally for whatever reason and who are not addicted, may now buy less of the product. But because these evil companies increased the prices for their loyal customers, I am sure they got it all calculated beforehand that the additional profit they will generate will cover for the losses of the casual cigarette smokers.
And something else interesting I realized is something along the lines of how Mr Bach kept on saying "time makes everything elastic:"
imagine these addicts had the time,the money and resources to go to rehab? Maybe the cigarettes won't be that much of a inelastic necessity then...
BUT
because they are spending additonal money on the cigaretts they wouldn't have any left for rehab!
I agree with you that cigarettes are inelastic. People are so use to smoking and "need" to smoke that it turned into a neccessity. So a increase in price for cigarettes won't cause the demand to decrease greatly. Perhaps if they increase the price by a lot then the demand would go down, people would think that it is too expensive and perhaps call it quits. Also if tehy really want to decrease the demand for cigarettes, perhaps they should lower the prices for those cigarettes stopper things and advertise it more. So inconclusion, the price increase for cigarettes wont't cause a great effect for companies because they would conpensate back from the people that smokes regularly.
Mao Minday
Post a Comment