” Tobacco use contributes significantly to adult mortality rates, with about 20

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Tobacco use contributes significantly to adult mortality rates, with about 20 percent of all cancer deaths directly linked to usage. Consequently, because of the detrimental effects of tobacco use, especially cigarettes, can help to reduce many preventable deaths. It is critical to keep youths from starting to use tobacco as they are unlikely to engage in the harmful habit when they are older. Mandatory health warnings, public service announcements, and prohibiting advertising on television and public spaces are all policies aimed at shifting the demand curve to the left (Yang, 2020). As illustrated in the figure, when these policies are utilized to reduce the prevalence of cigarette smoking, the demand curve D1 shifts to the left to D2. Because of the shift, the number of cigarettes smoked per day falls from 20 to 10 (Mankiw, 2015). If the policies are successful, the equilibrium shifts from point A to B as the price remains the same at $2.00.

In contrast, implementing a tax hike affects the pricing of a pack of cigarettes. The tax raise increases the price of cigarettes per pack from $2.00 to $4.00. The price increase does not result in a shift in the demand curve but instead leads to a movement along the demand curve from point A to C. Consequently, owing to the movement, the number of cigarettes smoked per day decreases from 20 to 12.
Raising taxes on tobacco products, such as cigarettes, increases the price of the products, resulting in them becoming less affordable. The products experience a reduction in demand due to them becoming less affordable, and is vital to preventing youth initiation. Young people have low disposable income, making the group more responsive to increases in the prices of tobacco products (Corrigan et al., 2021). Hence, increasing taxes on tobacco products, such as cigarettes, means youths will disproportionately enjoy the economic and health benefits of not being initiated into smoking.
Much of the tax increase is passed onto the consumer through higher prices. Research has shown that a 10 percent increase in the prices of tobacco products results in a 4 percent decrease in the prevalence of smoking among adults. Much of the price impact on tobacco consumption among adults is from prevalence reduction and remaining smokers smoking less frequently. Among teenagers, a 10 percent increase in the price of tobacco products will result in a 12 percent decrease in smoking prevalence (Verguet et al., 2021). Younger smokers earn lower wages and are less dependent on tobacco, hence the higher sensitivity of consumption to price increases. Additionally, the demand for cigarettes and the demand for marijuana respond similarly to price increases as they appear to be complementary.
Although some studies have suggested that increasing prices for cigarettes would increase marijuana use, evidence suggests that there is a cross-price effect owing to their complementary nature. Therefore, policies, such as tax increases that are targeted at reducing cigarette use, are also likely to cut marijuana use. In conclusion, increasing taxes on tobacco products remains the most effective policy for reducing tobacco use. An increase in prices resulting from tax hikes reduces the prevalence of tobacco use among adults and youths, the initiation and uptake among young people, consumption rates among continuing users, and induces current users to quit.
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References
Corrigan, J. R., Hackenberry, B. N., Lambert, V. C., Rousu, M. C., Thrasher, J. F., & Hammond, D. (2021). Estimating the price elasticity of demand for JUUL E-cigarettes among teens. Drug and alcohol dependence, p. 218, 108406.
Mankiw, N. G. (2015). Principles of Microeconomics. Cengage. Book.
Verguet, S., Kearns, P. K., & Rees, V. W. (2021). Questioning the regressivity of tobacco taxes: a distributional accounting impact model of increased tobacco taxation. Tobacco Control, 30(3), 245–257.
Yang, P. K. (2020). Legal Scrutiny of an Indirect Advertising Ban on Tobacco Products under WTO Laws. Currents: J. Int’l Econ. L., 24, 60.”
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