Question

******I KNOW THIS QUESTION HAS ALREADY BEEN ANSWERED; HOWEVER I WOULD LIKE A DIFFERENT ANSWER***** With the aid of supply and demand diagrams, explain how each of the following would likely affect the prices and quantities of cigarettes sold in the US. (a) A cure is found for lung cancer. (b) There is a substantial increase in wages in tobacco growing states. (c) A fertilizer that increases the yield per acre of tobacco is discovered. (d) There is a substantial increase in the price of matches and cigarette lighters.

Answer 1

a) A cure for lung cancer will increase the demand for the cigarettes and shift the demand curve to the right increasing the price and quantity of cigarettes consumed.

b) Increase in the wage of tobacco growing state will affect the supply of the tobacco making it much costlier. The price of the cigarettes will increase and the demand will decrease.

c) A fertilizer will increase the production of tobacco and make the cigarettes cheaper. This will again shift the supply curve to the right at a lower cost and higher supply.

d) An increase in the price of matches and lighter will make the consumption of cigarettes costlier and decrease the consumption. This will not shift the demand curve but a movement along the curve will occur decreasing the supply at a higher cost.