country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Investigation Into Supply And Demand Of Cigarettes

tag 3 Downloads8 Pages / 1,761 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss about the Investigation into Supply and Demand of Cigarettes.
 
 

Answer:

Introduction

This paper will help us to understand the demand and supply of cigarettes in Australia. We shall also mention the factors affecting the market in terms of the supply of and the demand for cigarettes in the tobacco industry, including the income effect, effects of close substitutes and complements, as well as the price and income elasticity of cigarettes in the market.

A cigarette is a product derived from cured tobacco and finely processed tobacco leaves, and reconstituted tobacco, rolled or stuffed into a paper cylinder. It is consumed through smoking, either on its own or with other combined additives. The market of cigarettes in Australia falls under the tobacco industry.

The tobacco market in Australia is part of the world tobacco industry. There are three important tobacco companies with operations in Australia. These are Phillip Morris International (Australia), Imperial Tobacco Australia, and British American Tobacco Australia which are wholly owned subsidiaries if the parent companies abroad. Despite the restrictive regulatory environment that encompasses these companies, they continue to thrive successfully in operations and are highly profitable. This is in spite of the Australian tobacco market being considered mature with reducing consumption per capita.

Information about the operations of the local companies is very limited. This is because the companies are owned overseas and they are not listed in the Australian Securities Exchange. Only British American Tobacco Australia and Philip Morris offer little information on their websites. In the case of Imperial Tobacco Australia, there is very limited information on the operations in Australia. The big part of information that is used in this paper about the market for cigarettes and the Australian tobacco companies and their environments of operation, have been sourced from reports and other literature that were published by other authors.

Demand and Supply of Cigarettes

For every business enterprise, the determination of the price of its products is very important not only for the success of the product but also for the profitability of the organisation. The organisation must consider the effective demand and the effective supply of its products and come up with the best price that will maximise revenue generation for the organisation. Changes in price of the products will affect its demand and in turn affect the operations of the organisation. These fluctuations in prices will be as a result of the internal or external environment, or both of the conditions in which the organisation operates.

Demand for a product or service is how much of the commodity a buyer will want to purchase at a particular price in the market. It is the amount of a particular commodity that a consumer or a group of consumers are willing and able to buy, given a particular price over a specific time. When the quantity demanded and the price are plotted on a graph, it gives the demand curve. The prices and the quantity demanded of a good or service have an inverse relationship. This implies that, the quantity demanded reduces whenever prices increase, and vice versa (Salvatore, 2011). This relationship between the price and the quantity demanded can be expressed in the form of a demand curve as shown in the figure below. The line DD is the demand curve of the commodity

Demand for a commodity is usually determined by the price of the commodity in addition to the prices of other related commodities. The relationship between commodities may be in the form of substitutes where the products can be used as an alternative for each other, or can complement each other in that they go together in consumption. However, there are cases where the own price of the commodity does not affect the demand for it. An example of such commodities is cigarettes where demand is not related to price completely and in extreme cases, it is infinite at any given price (Beardshaw, 2001).

Philp, Dan and Galt (2009) observed that the demand in relation to cigarette smoking as caused by a number of determinants with the major factor being the current own price of the cigarettes. Due to this, the quantity demanded of cigarettes is a function of its price, the income level of the individual consumer, existence of other related goods like substitutes (herbal and electronic cigarettes, shisha, etc.), and other external factors like raw material and labour availability, which affect the final price of the good. we can then represent this information mathematically as Qd = f (P, Y, R, E), where Qd is the quantity of cigarettes demanded, P is the price of cigarettes, R is the price of the related good in this case its substitutes, and E represents the external factors that affect the final price of the cigarettes.

When we consider this equation, it will be difficult to deduce the influential demand of cigarettes due to the diversity of the independent variables that will constitute the quantity demanded and the market price. Hence, we will assume that all the other factors are held constant and then we will analyse the quantity demanded as a function of its price alone. In the figure above, we can note that the higher the price of cigarettes, the lesser the quantity of it is demanded. Consequently, prices will have to reduce for demand of cigarettes to increase. This is the law of demand. The price elasticity of demand is the measure of how much the quantity demanded will respond to the changes in the price of the commodity.

 

Previous studies have found that the quantity consumed of cigarettes is not related to price. This means that changes in the price of cigarettes has little or insignificant effect on the quantity consumed. It is because of this that many economists view the consumption of cigarettes as illogical in the sense that it does not obey the fundamental law of demand in economics. The same applies to consumer’s disposable income where changes are inconsistent with demand. In this case, income may have a negative effect or no effect at all to the consumer’s demand.

The Australian government has put a lot of effort in reducing cigarette smoking among its citizens. In a bid to reduce smoking in public places and private places of duty because of the harm to other non-smokers and to the environment. Government policies have been put into place, including taxation and retraction in advertising and promotion. These measures have had an impact in the demand for cigarettes, which has reduced considerably especially to the younger generation.

Supply refers to how much a seller is able and also willing to avail goods or services to the market at a given price. It is the quantity of a particular commodity that a seller wishes to sell at every possible price in the given market at a particular time, holding other factors constant. Supply is related to scarcity in that only scarce commodities have a price attached to them.  The relationship between the price and quantity supplied of the commodity, when plotted on a graph will yield the supply curve. Whenever the price of a commodity is high, suppliers will be willing to bring more of the commodity to the market. the reverse happens when the prices are low- less of the commodity will be supplied. The relationship between prices and the quantity supplied is direct. This is shown in the figure below. The line SS is the supply curve.

According to Philp, Dan and Galt (2009), supply in the cigarette market shows the number of competitors setting the price of cigarettes. The quantity supplied is a function of the level of technology which will determine the price, the expenses incurred to acquire resources needed to produce cigarettes, presence of substitutes, the manufacturing process and other external factors such the cost of capital and labour. All these are the factors that affect the supply of cigarettes. We will represent this mathematically as Qs = t (P, Fr, Fm, w), where Qs is the quantity supplied, T is the level of technology used in production, P is the price of cigarettes, Fr is the cost of resources such as labour, Fm is the quality of the manufacturing process, and w represent the other charges like cost of machinery. Identical to the analysis of demand, we will hold the other factors constant and relate quantity to price as its function.

From the supply curve above, we can see that investments in production will require a certain level of supply to reach the break-even point. Because of this, the higher the capital spent on the price, the more the organisation will need to supply. It is due to this that cigarette-manufacturing companies differentiate their products and push for a higher supply so as to maximise profit. Whenever the prices are high then there will be high supply of the commodity to the market and vice versa. This is the law of supply.

Conclusion

We have seen how the forces of demand and supply work in the market for cigarettes and how this information can assist management in making decisions concerning demand and supply. It is important to note that the supply and demand of cigarettes is not affected by its own price but other factors such substitutes and government policy.

 

References

BRADFORD, W. D. (2003). Pregnancy and the demand for cigarettes. American Economic Review. 93, 1752-1763.

BEARDSHAW, J. (2001). Economics: a student's guide. Harlow, Pearson Higher Education.

BEGG, D. K. H. (2013). Foundations of economics. London u.a, McGraw Hill Education.

BEGG, D. K. H., & WARD, D. (2016). Economics for business.

CAPELLA, M. L., TAYLOR, C. R., & WEBSTER, C. (2008). The Effect of Cigarette Advertising Bans on Consumption: A Meta-analysis. Journal of Advertising. 37, 7-18.

LIPSEY, R. G., & HARBURY, C. D. (2004). First principles of economics. Oxford, Oxford University Press.

LIPSEY, R. G., LANGLEY, P. C., & MAHONEY, D. M. (1985). Positive economics for Australian students. London, Weidenfeld and Nicolson.

MANKIW, N. G., CROUSHORE, D. D., & STULL, C. A. (2009). Principles of economics. 1, 1. Fort Worth [u.a.], Dryden Pr.

PHILP, B., WHEATLEY, D., GALT, V. (2009). Business Economics, Unpublished Course Notes, Nottingham Trent University, pp. 9-15.

PHILP, B., GALT, V. (2009). Business Economics, Unpublished Course Notes, Nottingham, Nottingham Trent University p 2.

SLOMAN, J. (2005). The economic environment of business. Harlow, England, Financial Times Prentice Hall.

VARIAN, H. R. (2014). Intermediate microeconomics: a modern approach.

VICTOR, P. A. (2013). The costs of economic growth. Cheltenham, UK, Edward Elgar Pub.

www.chowrangi.com/e-cigarette-quit-smoking-while-smoking.html

Download Sample

Get 100% money back after download, simply upload your unique content* of similar no. of pages or more. We verify your content and once successfully verified 100% value credited to your wallet within 7 days.

Upload Unique Document

Document Under Evaluation

Get Credits into Your Wallet

*The content must not be available online or in our existing Database to qualify as unique.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Investigation Into Supply And Demand Of Cigarettes. Retrieved from https://myassignmenthelp.com/free-samples/investigation-into-supply-and-demand-of-cigarettes.

"Investigation Into Supply And Demand Of Cigarettes." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/investigation-into-supply-and-demand-of-cigarettes.

My Assignment Help (2018) Investigation Into Supply And Demand Of Cigarettes [Online]. Available from: https://myassignmenthelp.com/free-samples/investigation-into-supply-and-demand-of-cigarettes
[Accessed 16 July 2020].

My Assignment Help. 'Investigation Into Supply And Demand Of Cigarettes' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/investigation-into-supply-and-demand-of-cigarettes> accessed 16 July 2020.

My Assignment Help. Investigation Into Supply And Demand Of Cigarettes [Internet]. My Assignment Help. 2018 [cited 16 July 2020]. Available from: https://myassignmenthelp.com/free-samples/investigation-into-supply-and-demand-of-cigarettes.


MyAssignmenthelp.com is one of the noted service providers that deliver essay help. We provide tailored essay assistance to make sure that student gets online essay help exactly in the way they want it to be written. We at MyAssigemnthelp.com have built teams of consultants, who readily attend every query related to help me writing my essay. We provide essay writing help in forms of tips and steps in order o assist students with tough essay assignments.

watch

Save Time & improve Grade

Just share Requriment and get customize Solution.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,362,932

Orders

4.9/5

Overall Rating

5,082

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

234 Order Completed

100% Response Time

Samantha Ji

PhD in Chemistry with Specialization in Organic

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

453 Order Completed

98% Response Time

Howard Asuncion

LLM in Criminal Law

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

416 Order Completed

95% Response Time

Tyler Moore

MBA in Accounting

Washington, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

3076 Order Completed

99% Response Time

Emily Wei

Doctor of Philosophy (Ph.D) in Civil Engineering

Singapore, Singapore

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

hello I am very satisfied with the work you did for me. I will not hesitate to take your services again for future assignments, proudly recommend... please review your price for returning customers

flag

User Id: 457107 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

Thanks to this expert in following closely on the assignment structure. Appreciated it :)

flag

User Id: 415901 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

Great work! I am very pleased with my outcome. It was was easy to understand, yet consistent with the business quantitative method lingo in answering the questions.

flag

User Id: 383727 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating

thank you for the good work progress, really like how it\'s done and on time submitted to me

flag

User Id: 225590 - 15 Jul 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?