Economics for Business: Smoking Rates, Excise Tax, Unemployment and Policies

This article discusses smoking rates in Australia, excise tax on cigarettes, cost-benefit analysis, policies to reduce smoking, causes of unemployment, and youth unemployment rates in Australia compared to the world.

Running Head: ECONOMICS FOR BUSINESS 1
ECONOMICS FOR BUSINESS
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ECONOMICS FOR BUSINESS 2
Compare and contrast the rate of cigarette smoking in Australia with your home country
and the world average rate.
Cigarette smoking is a behavior which has had uniform impacts across the world and
which requires attention in consideration to its impacts on the human health. Some of the similar
features of cigarette smoking rates in Australia with my home country (XXX) and the world at
large first lie on the most affected age group. According to the current Australian smoking
statistics as obtained from Better Health Organization, the most affected group lies between 18-
44 years with a margin of 16.3% (Cho, Thrasher, Swayampakala, Yong, McKeever, Hammond
& Borland, 2016). These results directly relate to smoking statistics of my home country just as
those of the world population. The most affected gender according to Australian Health
Organization is the male gender and the same applies to the world statistics as presented by the
World Health Organization.
Despite of these similarities, there are also some distinct features of cigarette smoking in
Australia with my country and the world at large. For instance, the rates of cigarette smoking
among the Australian male gender has been decreasing while that of women increasing. This is
contrally to my countries trend and that of the world where the rate of smoking among male
gender has been increasing at faster rates than that of female gender. Also, the general cigarette
smoking behavior in Australia has indicated to be in a declining phase where people are quitting
the behavior at high rates than those getting into it (Hodyl, Grzeskowiak, Stark, Scheil & Clifton,
2014). This trend is different from my country and the whole world because where the rates of
smoking are increasing gradually because of the large number of those getting into the behavior
compared to those abandoning it.

ECONOMICS FOR BUSINESS 3
Draw and label fully a supply and demand curve diagram to explain how an excise tax on
cigarettes affects
In general, when exercise tax is imposed on cigarette both the supply and demand for the
commodity will reduce and drive the market equilibrium to higher prices compared to the case
when the tax had not been levied and quantities lower than when the tax had not levied. When
tax is imposed on cigarette, the first expectation is that the market prices will increase with a
margin similar to the tax imposed from (b-a) according to the above diagram. At price (a), the
demand for cigarette will decline as a result of the high prices since consumers are likely to be
discouraged from using this commodity because it’s not a commodity they must consume. This
however is the case when considering cigarette as an elastic demand commodity (Zoutman,
Gavrilova & Hopland, 2018).
According to elastic demand definition, it is when commodity prices or other factors play
big roles in determining the quantities of products which consumers want to buy as simplified in
the diagram below

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However, when cigarette is considered as a must to consume commodity it shifts from an
elastic demand commodity to an inelastic demand commodity hence displaying a different
demand-supply curve. This is in consideration to the fact that in inelastic demand, the demand of
commodities does not increase with increase or decrease in the corresponding rise or decline in
their market prices (Feldman & Ruffle, 2015). Such cases are however evident in the cases of
must to use commodities like gasoline. So if the cigarettes are taken under the bracket of must to
have goods like gasoline, the demand is likely not to be affected by the exercise tax which has
direct impacts on the commodity price.
In consideration to the impacts of the imposed exercise duty on cigarettes, the tax
revenue which the government was earning will have a direct increment because the two have
direct proportional relationship i.e. when exercise tax increases, tax revenue increases also and
when exercise tax decreases, the tax revenue as well declines as shown in the diagram below

ECONOMICS FOR BUSINESS 5
Explain the idea of cost versus benefit when making decisions
When making decisions in regard to purchasing a commodity or not to purchase it, it has
been discovered that the cost of commodity when compared to the benefits expected from it
plays a very crucial role in the final decision reached by the buyer (Miura, 2018). For instance in
the case of cigarette purchases, when the prices goes extremely high, some smokers will chose
not to purchase then in consideration that they are spending highly on something which is likely
to cause health problems to them after all. This definitely makes them shy away from purchasing
as compared to when the cigarettes are cheap.
So, when government wishes to reduce the smoking rates within the country, it
automatically imposes exercise tax on cigarettes translating to increased prices of the product

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and that definitely cuts off some smokers who are likely to consider the high prices of the
commodity and compare them with the benefits of the commodity hence shying away from its
purchase (Boadway, 2016). Also, when smokers age should stop smoking because mainly
cigarettes are taken as stimulants for purposes of being fruitful in whatever the person is engaged
in. At the old age however, activities which need stimulants to be performed are out of the
brackets of the person and hence it will be of no benefit to incur the cost of purchasing it when it
won’t help in any way.
Describe and evaluate the various policies over the years that the Australian and State
governments have enacted in order to reduce smoking.
Plain Packaging
Apart from heavy tax imposition on cigarettes as an approach to control cigarette
consumption in Australia, the government has also got into this campaign against cigarette
consumption through plain packaging approach (Noar et al, 2016). Through the approach, it was
believed that some of the pictures which were initially displayed on the packages were more
appealing to the eyes even to an extent of enticing youths to think that they were safe to
consume. For instance, images of world celebrities would convince the youths who look up to
them that cigarettes are good stuff to consume.
Health Warnings
Also, health warnings have been recently displayed on the package boxes together with
scaring pictures taken from the cigarette smoker’s side effects. Some of these pictures include
but not limited to discolored teeth, cancerous lungs, throat cancer and others. Through the

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manner they are drawn, it may easily send signals of change to a person who is almost becoming
a victim and change (Purcell, O'Rourke & Rivis, 2015).
Plain packaging avoids the bias which comes with manufacturers drawing some enticing
images in the package boxes and which can easily trick youths into starting the smoking habits.
Among those enticing images are like the images of celebrities like Rihanna.
This research warns against any form of encouragement in regard to cigarette smoking
and advocates for facts to be let in a limelight concerning cigarette smoking impacts. Through
that, those who fall in the trap are likely to be the ignorant crew.
What are the causes of the following types of unemployment?
Unemployment exists in different forms, such forms include: structural, frictional,
cyclical, seasonal and disguised unemployment. Each of them is caused by different factors all
playing within the country’s economy. Frictional unemployment for instance, it occurs when
there is changing demand patterns within an economy hence dislocating the existing patterns of
production to an extent of rendering labour redundant (O’Reilly et al, 2015). Structural
unemployment on the other hand arises as a result of demand changes which switch production
from one kind of work to another. Thirdly, cyclical unemployment arises from business cycles
which lead to deficiency of demand or the purchasing power. Seasonal unemployment
consequently occurs due to seasonal demand patterns and the seasonal nature of some industries.
Lastly, disguised unemployment is due to population growth, land shortage and existence of
some social institutions like the joint family systems.

ECONOMICS FOR BUSINESS 8
Using information from the captioned article as your guide, use Supply and Demand
curves and analyze
- The factors causing changes in the Supply of 15 to 24-year old workers over time.
Increase in education attainment
Young people have increased in their enrolment into full time education programs. This
has also increased their demand due to possession of relevant skills required in the market.
Through that, their supply has increased. However, on the same note, since most of them are
under full time programs, some of the jobs which need full time workers tend not to favour them
and hence reducing their supply in the labour market (Zoya & Natasha, 2017).
- The factors causing an increase in demand for 15 to 24-year-old workers.
The demand for young people under the bracket of 15-24 has increased because most of
them have begun to enrol into education programs which equip them with the necessary skills
required in the labour market. Initially, just a few could have qualifications required hence
filtering out those who lacked skills in the labour market (Zoya & Natasha, 2017).
Describe and evaluate the factors that are driving the fact that 15-24-year-old work part-
time or casual rather than full time
The statistics showing that young people in Australia are mainly working as part timers
outlined that most of the young people under the bracket of 15-24 years are enrolled in full time
education programs whereby only time they can afford in the labour market is during the part
time hours when they are off the education program (Zoya & Natasha, 2017) . In addition to
education program being factor behind this trend, recent labour demand developments have also
played a major role in the trend. For instance, there have been increases in part time employment

ECONOMICS FOR BUSINESS 9
and a decline in full time jobs. For that matter, young people who are unemployed tend to utilize
the chance instead of staying to wait for full time employment.
Describe the rate of youth unemployment and underemployment in Australia. Provide
reasons for this rate.
The rate of youth unemployment is approximately 12.5% and which is considerably
higher than that of old people. This rate is consistent with the fact that there has been spare
capacity in the labour market of Australia over the past few decades (Zoya & Natasha, 2017).
Also, employers have been showing some level of reluctance when hiring young people because
they are considered to be less experienced and lacking skills. The underemployment rates of
young people has also been rising, 20% because of the increased share of 20-24 years old youths
who are working part time but not in full time programs of study.
Compare and contrast rates of youth unemployment in Australia with your home country
and the world average. Analyze the causal factors behind these differences or similarities.
Youth unemployment in my home country and the world at large is higher compared to
the figures of Australia presented currently. For a fact, Australia is a first world country whose
economy has made several steps ahead through the initiation of projects which have absorbed
most of their youthful population hence reducing the number of unemployment youths (Zoya &
Natasha, 2017). My country being a third world country has not made such advances to reduce
unemployment rates just like it is the case with most of world countries. However, Australia
shares some common features with my home economy in regard to unemployment rates, most of

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the unemployed people are youths and this can be attributed to the fact that youths are majority
in both economies.
References
Boadway, R. (2016). Cost-benefit analysis. In The Oxford Handbook of Well-Being and Public
Policy (p. 1569). Oxford University Press.
Cho, Y. J., Thrasher, J. F., Swayampakala, K., Yong, H. H., McKeever, R., Hammond, D., ... &
Borland, R. (2016). Does reactance against cigarette warning labels matter? Warning
label responses and downstream smoking cessation amongst adult smokers in Australia,
Canada, Mexico and the United States. PLoS One, 11(7), e0159245.
Feldman, N. E., & Ruffle, B. J. (2015). The impact of including, adding, and subtracting a tax on
demand. American Economic Journal: Economic Policy, 7(1), 95-118.
Hodyl, N. A., Grzeskowiak, L. E., Stark, M. J., Scheil, W., & Clifton, V. L. (2014). The impact
of Aboriginal status, cigarette smoking and smoking cessation on perinatal outcomes in
South Australia. Med J Aust, 201(5), 274-278.
Miura, G. (2018). Cost–benefit analysis. Nature chemical biology, 14(10), 903.
Noar, S. M., Francis, D. B., Bridges, C., Sontag, J. M., Ribisl, K. M., & Brewer, N. T. (2016).
The impact of strengthening cigarette pack warnings: Systematic review of longitudinal
observational studies. Social Science & Medicine, 164, 118-129.
O’Reilly, J., Eichhorst, W., Gábos, A., Hadjivassiliou, K., Lain, D., Leschke, J., ... & Russell, H.
(2015). Five characteristics of youth unemployment in Europe: Flexibility, education,
migration, family legacies, and EU policy. Sage Open, 5(1), 2158244015574962.

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Purcell, K. R., O'Rourke, K., & Rivis, M. (2015). Tobacco control approaches and inequity—
how far have we come and where are we going?. Health promotion
international, 30(suppl_2), ii89-ii101.
Zoutman, F. T., Gavrilova, E., & Hopland, A. O. (2018). Estimating Both Supply and Demand
Elasticities Using Variation in a Single Tax Rate. Econometrica, 86(2), 763-771.
Zoya Dhillon& Natasha Cassidy (2017). Labour Market Outcomes for Younger People.
Retrieved from: https://www.rba.gov.au/publications/bulletin/2018/jun/pdf/labour-
market-outcomes-for-younger-people.pdf