Question

Why is the price elasticity of demand for cigarettes among teenagers greater than it is among those 20 and over?

Answer 1

The price elasticity measures the percentage change in quantity due to a unit percentage change in price, and is depicted as . It is a statement about steepness of the demand curve, and tells us how much quantity consumed will change due to change in a price. It is of course different for different demand determinants, as in this case, for teenagers and adults. If a price elasticity is high, it means that for a particular change in price , the change in quantity will be more than if the price elasticity was low.

The answer is that, the higher price elasticity of the teenagers than that of adults is caused by addiction apart from income stability and saving orientation. The teenagers, in a general sense, are the 'experimenting' individuals, and are not strictly addict, while having low income. If the price of ciggerettes get lower, they would purchase more ciggerettes than the adults would purchase, as they are experimenting and the their ciggarette's purchasing power is increased. The adults however, have more stable income than teenagers, and are addicts in the sense that they would smoke an amount of limited interval (5 to 10, 10-15, 50-60, etc), and no more as well as no below than that. Hence even if price changes highly, they would smoke number of ciggarettes according to their addicted interval. For example suppose price of ciggarette is $10, and the teenager smokes 2 ciggarettes while the adult smokes 10 per day. If the price rises to $20, the teenager might half their consumption to 1 ciggarette (50% decrease) per day, but the adult, who is an addict and/or have stable income, would smoke no less than 7 ciggarettes (30% decrease), as having a stable income, or having the least critical need of their addiction. Also, suppose price decreases from $10 to $5, the teenager might buy 6 ciggarettes (200% increase) as not caring about saving and/or experimenting more, but the adult might by no more than 14 ciggarettes (40% increase), as their addiction doesn't require experimenting more and being content with that increase and/or they care about saving.

Note: Several numerical and measurement factors of the elasticity can be putted, but the background of the overall is what is the basic cause.