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
Increases
Decreases

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
Increases
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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