1. Case Study in Demand Elasticity The Market for Cigarettes

2. Cigarettes: Effect of Price Increase on Demand 0 D1D1 $/pack Packs/day (millions) A C 20 $2.00 $4.00 15

3. 2012 Cigarette Prices (US$)

4. http://www.tobaccoatlas.org/costs/cig_prices/prices/ Cigarette Prices Around the World

5. US Cigarette Price vs. Consumption Price/pack Billions of packs/year

6. Estimating US Demand Elasticity for Cigarettes Year 1970 2007 Price ($2007/pack) $1.75 $4.25 Quantity billions of packs/year 27 17

7. Prohibition Against Cigarette Advertising

8. Exceptions

9. Anti-Smoking Adveritising IN FRANCE IN ITALY

10. Cigarette Packaging in Canada

11. Anti Smoking Laws Legal Age –Spain, Holland: 16 –France, Italy: 18

12. Anti-Smoking Laws

13. Scope of Anti-Smoking Campaign: Shift Demand Curve 0 D1D1 Price/ pack Packs per day(mill) D2D2 Decrease in demand

14. Scope of Anti-Smoking Campaign: Flatten Demand Curve 0 D2D2 $/pack Packs/day (millions) D1D1 If the demand curve is flatter (more elastic) the same increase in price will case a greater reduction in demand

15. References http://www.tobaccoatlas.org/costs/cig_prices/prices/ http://www.hc-sc.gc.ca/hc-ps/tobac-tabac/legislation/label-etiquette/graph/index-eng.php http://www.imf.org/external/pubs/ft/fandd/1999/12/jha.htm http://www.cdc.gov/tobacco/data_statistics/tables/economics/trends/index.htm http://tobaccocontrol.bmj.com/content/11/suppl_1/i62.full