Increasing Taxes on Cigarettes:
Increasing Taxes on Cigarettes
In this paperwork, I am going to respond to the following question- will increasing taxes on cigarettes reduce smoking in the U.S.
Through a literature review, it is depicted that an increase in taxes on cigarettes will definitely reduce smoking in the U.S. Smoking occurrence is claimed to reduce from 20% in 2004 to 15% in 2025. It is important to note that the cost of a packet of cigarette will have to go up, as a result of the implementation of this policy-increasing tax on cigarettes. Low income smokers, especially the teenagers, will not be spared by this policy, therefore, affecting the demand of cigarettes negatively (US DHHS, 2010).
The demand will decrease as a result of the implementation of this policy, but according to the law of supply and demand, it depicts that a decrease in demand will result to the price going down, hence discouraging some of the suppliers. In this case, the law of supply and demand may fail to apply, since the rise in prices is as a result of the imposition of taxes and not the demand or supply of resources. According to the weekly reading, it is depicted that price elasticity of demand and supply illustrates how receptive buyers and sellers are to alteration in the price of a good (Week 1 and 2 reading; chapter 1-6). After the implementation of taxes on cigarettes, the price elasticity of demand will definitely blast up, greater than one, hence resulting to the consumers buying a great deal less of the cigarette. According to economists, PED> 1 implies that the demand is receptive to price changes, hence lessening the demand for cigarettes- after the implementation of taxes on cigarettes. The implementation of this policy will also affect the utility of smokers as a result of the higher prices of cigarettes. If a smoker was smoking two packets in a day, then he or she will be forced to take one packet and, as a result, he or she will not attain his or her level of diminishing marginal utility. The smokers will mostly be interested with the cigarettes that give them the highest utility, hence avoiding the situation, whereby, any additional cigarettes will results to reduced total utility (Harris, 1999).
References
US DHHS . U.S. Department of Health and Human Services . Healthy People 2010.Washington,
DC: Government Printing Office; 2000.
Vensim 4.2.Ventana systems Inc.; Harvard, MA: 2000
Harris J. The Continuum: Cigarette Smoking in Relation to Price Among Americans Aged 15-
29. Health Econ.1999; 8:81-6.
