Demand Elasticity Please, read the article Hainer, R. (2010), provided in the required readings...

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Demand Elasticity Please, read the article Hainer, R. (2010), provided in the required readings section for this week. The tobacco industry is a prime example to consider when talking about price...

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Demand Elasticity

Please, read the article Hainer, R. (2010), provided in the required readings section for this week. The tobacco industry is a prime example to consider when talking about price elasticity of demand. While nicotine use can be addictive for many users, it is not addictive for the so-called "social smokers".
What can we say about the price elasticity of demand for nicotine products (such as cigarettes, pipes, tobacco) in the group of nicotine addicted users, versus the group of "social smokers"? Can we say whose demand is likely to be more elastic? Why?
Guided Response: Provide your response to the discussion question in 300 words or more. Further, comment on the effectiveness of government policy aimed at reducing the negative effects of smoking on health. For example, consider high taxation on producers? – is that effective? Substantive responses use theory, research, and experience or examples to support ideas and further the class knowledge on the discussion topic.

Hainer, R. (2010).Social smokers aren't hooked on nicotine, just smoking(Links to an external site.)Links to an external site..Cable News Network. Retrieved from http://www.cnn.com/2010/HEALTH/04/24/social.smokers/index.html

Answered Same Day May 13, 2021

Dr. Smita · Accepted Answer

Price Elasticity of Demand
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Price Elasticity of Demand		[Type the document subtitle]		[Pick the date]		HP	
PRICE ELASTICITY OF DEMAND
Price elasticity of demand refers to the responsiveness of the change in demand for quantity of a good with respect to change in price. The price elasticity of demand can be measured by dividing the percentage change in quantity demanded with that of percentage change in price. As per the law of demand price of goods and quantities demanded of goods are inversely related and therefore price elasticity of demand is expressed with the minus (-) sign as price and quantity demanded always move in opposite direction. 
Based on the degree of elasticity, there are 5 catagories of elasticity of demand:
· Perfectly Price Elastic 
· Perfectly Price  Inelastic 
· Relatively Price Elastic 
· Relatively Price Inelastic 
· Unitary Price Elastic 
When the price of good changes and the consumer does change his level of consumption, the price elasticity of demand in inelastic and when the price of good changes and consumer makes a change in his level of consumption price elasticity of demand is elastic.
In case of the addicted categories of smokers any change in the price of cigarette will not modify their smoking habits. They would continue to smoke as they were. Hence, price elasticity of demand in case of addicted category is relatively inelastic. On the contrary, in case of social smokers who are not addicted to smoking can always reduce their purchases when the price of cigarette goes up. As it is they do no spent a lot of money on the purchase of cigarette packet they will further refrain from purchasing and save upon the money when the price of cigarette goes up. The price elasticity of demand for social smokers is inelastic.
Effectiveness of Government Policy to reduce the negative effect of Smoking:
The government policy targeted towards the price of cigarettes and nicotine products to reduce or discourage smoking may not prove fruitful to the category of people who are highly addictive. Further, if the price of addictive products escalates too high they addictive smokers may chose to consume cheaper and lower level brands which may prove even more harmful. The government should adopt a holistic policy to reduce the effect of smoking. Price targeted policy may not prove fruitful because of inelastic price elasticity of demand in case of highly addictive smokers.
References:
Boshoff, Willem & van Jaarsveld, Rossouw. (2019). Market Definition Using Consumer Characteristics and Cluster Analysis. South African Journal of Economics. 
Froeb, Luke & J. Werden, Gregory. (1991). Residual Demand Estimation for Market Delineation: Complications and Limitations. Review of Industrial Organization. 6. 33-48. 
Vukadinovic, Predrag & Damnjanovic, PhD Aleksandar & Krstić-Ranđić, Jelena. (2017). The analysis of indiference and the price elasticity of demand between different categories of agricultural products. Economics of Agriculture. 64. 671-685.

Demand Elasticity Please, read the article Hainer, R. (2010), provided in the required readings section for this week. The tobacco industry is a prime example to consider when talking about price...

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