The Cigarette Market Case Study

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the weekend (Manelski). Most casual smokers also just see smoking as a luxury, or even may be used as an accessory to them. But if a casual smoker were to have a low income the demand for cigarettes would decrease, making cigarettes a normal good because the demand decreases when income decreases. Furthermore, if the price of cigarettes were to increase it is likely that the demand from a casual smoker would decrease because they would stop purchasing cigarettes.

Demand Graph for Casual Smokers
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So in stating that, since casual smokers are obviously influenced by the price change, this makes their elasticity of demand more elastic. �Elastic demand is when the percentage change in demand exceeds the percentage change in price� (Bade, 116). In contrast, those that are addicted to smoking are the biggest demanders in this market. Unlike casual smokers, if an addict had a low income it is likely that this wouldn�t change their demand for cigarettes. Same ...

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are affected by the main natural resource used to make it, tobacco. �In a competitive market, the supply of tobacco is determined by the price of tobacco and production costs of tobacco relative to its competing crops� (8 Review of Literature). If the input prices of tobacco increases, manufacturers with either decrease their supply if cigarettes or increase the price of their product.

Supply Graph
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Decreases


Another factor that would influence the supply would be a complement in production, which is a good that is produced with another good. Studies have shown that tobacco and marijuana are compliments because there was a greater use of marijuana ...

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