Question

In an attempt to curb smoking, governments can use two basic approaches to do so.  The first is to reduce the demand for smoking though public education.  The second is to do so via legal restrictions or taxes.

1. With the aid of two graphs, explain how each type of policy reduces quantity in the affected markets.  What is the result on the price as seen by consumers for each type of policy?

2. Which of these two types of policies is likely to have more long-term success? Why?

Answer 1

a. The graph above represents the changein the quantity demanded of cigarettes over a period of time. It shows that legal restrictions and taxes will lead to rapid fall in the demand of cigarettes and then a constant demand. On the other hand, the public education will lead to a steady fall in the demand of cigarettes.

The price of the cigarettes will fall rapidly in case of legal restrictions and taxes. But it will fall slowly in case of public education.

b. Long term success will be obtained by public education only. As people will become aware of the negative aspects of smoking, they will automatically avoid it. Legal restrictions and taxes will lead to success in short term only. However a proper balance of both the methods will lead to the best results.