Premium Essay

Tobbacco

In: Other Topics

Submitted By himanshuk
Words 1750
Pages 7
JUNE 9, 2013
.
LEAVE A COMMENT
This blog will discuss the market of tobacco products through the applications of economic tools and analysis. To analyse the market, we will examine the price elasticity demand and income elasticity demand of tobacco products the factors affecting each of these and the externalities caused by this product. Further, to explore further into the tobacco market, this blog post will discuss the theory of Rational Addiction, which contributes greatly to tobacco consumption.

A. Elasticity of tobacco products

Before analysing the elasticity of the tobacco market, it is important to know the fundamentals of elasticity.

To start, elasticity refers to the degree of change of the demand or supply of a product in response to change in price of the product. The elasticity of products varies because consumers may find some products more essential than others. A good or service is considered to be highly price elastic if a price increase leads to a sharp change in the quantity demanded or supplied. Conversely, the demand and supply of price inelastic goods or services sees modest changes with any change in price. In most countries, the price elasticity of demand for tobacco products is fairly inelastic. This will be discussed further below.

I. Calculating price demand elasticity

To determine the price demand elasticity of a product’s demand curve, the following equation can be used.

Elasticity, Ped = (% change in quantity / % change in price)

If the elasticity value we obtain from the above formula is greater than or equal to 1, the demand curve for that product is considered to be elastic. On the other hand, if the value happens to be less than 1, the demand curve is inelastic.

Figure 1: An elastic demand curve. where a large decrease of quantity, Q would change due to any slight changes in P, Price. Can be shown by the...

Similar Documents

Premium Essay

Rural Economy in India

...Rural Economy in India Overall Rating: star ratingstar ratingstar ratingstar ratingstar rating[3/5]Total Votes [ 10 ] Rate this page: 1 2 3 4 5 The Rural Economy in India is wholly agriculture based and it is of tremendous importance because it has vital supply and demand links with the other Indian industries. Agriculture is the main stay of the Indian economy, as it constitutes the backbone of rural India which inhabitants more than 70% of total Indian population. The fertility of the soil has augmented the success of agriculture in India. Further, Rural Economy in India has been playing an important role towards the overall economic growth and social growth of India. India has been predominantly an agriculture-based country and it was the only source of livelihood in ancient time. During prehistoric time when there was no currency system the India economy system followed barter system for trading i.e. the excess of agricultural produce were exchanged against other items. The agriculture produce and system in India are varied and thus offers a wide agricultural product portfolio. Today, the rural economy in India and its subsequent productivity growth is predicated to a large extent upon the development of its 700-million strong rural population. The agricultural economy of India is drafted according to the needs of rural India since majority of the population lives in about 600,000 small villages. In India, agriculture accounts for almost 19% of......

Words: 558 - Pages: 3

Premium Essay

1993 Dbq

...During the 17th century, differing social, economic, and geographic factors shaped the Chesapeake region and New England. in different Throughout the century, New England maintained a strong, communal identity while the Chesapeake remained widely scattered. Through the hot river valleys of the Chesapeake had a climate that facilitated staple crop plantations and disease, New England’s extreme climate made mass production of staple crops and the spread of disease difficult. The combination of poor free men, and later, indentured servants and slaves, resulted in a larger rich-poor gap in the Chesapeake. When the New England settlers first arrived, they had strong ties to religion. They believed that it was their responsibility and God’s expectation that they create moral, Christian communities. John Winthrop reflects this in Doc. A by saying their failure would “open the mouths of enemies to speak evil of…God.” The Chesapeake settlers, however, had similar yet, separate, goals based on the economies. People’s main motives were not religious, but economic, there to “dig gold, wash gold, refine gold, load gold,” as per doc. F. This resulted in competition, rather than bonding, over the settlement. Document B reflects that people settled in New England with their families, whereas Doc. C shows that Chesapeake settlers were mostly single men. This happened because the religious freedom and practice was more appealing to families, to form communities that worship God, and......

Words: 1386 - Pages: 6