Monday, August 26, 2013

Microeconomic


Tobacco Company Marketing Strategies
Author(s): F. J. Chaloupka, K. M. Cummings, C. P. Morley and J. K. Horan
Source: Tobacco Control, Vol. 11, Supplement 1: Discoveries and Disclosures in the Corporate
Documents (Mar., 2002), pp. i62-i72
Published by: BMJ Publishing Group
Stable URL: http://www.jstor.org/stable/20208006 .
Accessed: 18/08/2013 02:32
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Question 1
? Which measure is particularly relevant in assessing the impact of raising cigarette
taxes on the consumption of cigarettes? (1 point)
? Provide some estimates of this measure while clearly citing the source. (1 point)
? Briefly mention two factors that can affect its size. (2 points)
? Assuming an adult smoker allocates income between smoking cigarettes and other
goods, what would be your guess about the slope of the price-consumption curve for
cigarettes?
Question 2
? Assume that all smokers allocate income between smoking cigarettes and “other”
goods and consider both of them as normal goods. Using a diagrammatical analysis,
explain why a young smoker’s adjustment to a price increase in cigarettes differs from
that of an adult smoker.
Diagram: 10 points; Explanation (including explaining the diagram): 20 points
[Hint: This question involves identifying and applying relevant concepts from Topic 1 to the
relevant material in Chaloupka et. al (2002).]
Question 3
? Apart from considering the impact on cigarette prices, what other factors would a
policy maker have to keep in mind to predict the likely impact of a cigarette-tax hike
on the consumption of cigarettes by the youth?
Question 4
? Discuss the potential benefits and costs of increasing cigarette taxes.
Question 5
? How much importance do tobacco companies attach to economic analysis and
concepts in shaping their strategy to counteract the effects of cigarette taxes?
Question 6
? Apply your knowledge of topic 2 to conceptualize the impact of the early adoption of
the Bonsack cigarette machine by the American Tobacco Company on its production
conditions, and how this facilitated the company’s rise to the dominant position in the
industry in the late 19th century.

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