Microeconomics Assignment: Elasticity of Demand for Nicotine Products

This microeconomics assignment examines the concept of price elasticity of demand and its application to nicotine products. The assignment analyzes how changes in price affect the quantity demanded by two distinct groups of smokers: nicotine-addicted smokers and social smokers. It defines and differentiates between elastic, inelastic, and unit elastic demand, explaining how the addictive nature of nicotine leads to inelastic demand for addicted smokers, meaning that changes in price have a minimal impact on their consumption. Conversely, the assignment suggests that social smokers may exhibit more elastic demand, with their consumption patterns potentially more responsive to price fluctuations. The assignment uses economic theory to compare the demand curves for the two groups and also references multiple academic articles to support its conclusions. The overall conclusion is that price elasticity of demand differs significantly between the two groups. The assignment provides a clear analysis of how price elasticity of demand affects the consumption of nicotine products.

Running head: MICROECONOMICS
Microeconomics
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Name of the University
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Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Reference.........................................................................................................................................4

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Answer 1
Price elasticity of demand can be defined as the alteration in quantity demanded of a
good in reaction to alteration in price of the good. The price elasticity of demand is called as
inelastic if the percentage alteration in demand is lower than the percentage alteration in price
(Jawad et al., 2018). The price elasticity of demand is said to be elastic if the percentage
alteration in demand is higher than the percentage alteration in price. Additionally, if the
percentage alteration in demand is equal to the percentage change in price then the price
elasticity of demand is said to be unit elastic.
As stated in the article there are two types smokers, one is nicotine addictive and the
other is social smokes. Nicotine addicted are the ones who smokes regularly and cannot quit due
to the addiction. On the other hand, social smokers are the ones who smokes occasionally during
the get together with friends or family gatherings (Ahmed, Diener & Bahri, 2019). These
smokers are not addicted to any kind of smoking. For the nicotine addicted smokers it is difficult
to quit smoking and thus whatever be the price of cigarettes, tobacco or pipes theses addicted
smokers find it hard to reduce consumption and thus the demand for smoking products for this
group of smokers. Therefore, the price elasticity of demand for nicotine in the case of nicotine
addicted smokers is highly inelastic in nature. It means that the demand curve for concerning the
nicotine addicted group is steep. Hence, the change in demand is negligible with change in price.
Alternatively, for the case of social smokers the price elasticity of demand varies that means
there are different types of social smokers such as smoking when drinking, smoking during get
together and some smoke because they like smoking (Corrigan, O'Connor & Rousu, 2020).
Hence, demand for smoking products for this group of smokers may fluctuate. The smokers who
smoke occasionally demand is perfectly elastic all the time except when they are smoking in a

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group. However, for the social smokers who smoke daily or with drink the price elasticity of
demand is relatively inelastic. Therefore, it can be said that price elasticity of nicotine products
for nicotine addictive smokers and social smokers are different.
Answer 2
It is already know that inelastic price elasticity of demand indicates that there will be very
negligible change in demand due to change of price of a product. Smoking products are demerit
good for nicotine addictive group of people but normal good for social smokers. Thus, as per the
microeconomic theory of elasticity it is known that price elasticity of demand is inelastic for
demerit goods and on the other hand, price elasticity of demand for normal good can be unit
elastic or relatively elastic (Stoklosa, Drope & Chaloupka, 2016). Therefore, it is evident from
the discussion that price elasticity of demand for smoking goods in the case for social smokers
can be atleast unit elastic. Therefore, it can be inferred from the above discussion that social
smokers’ demand is more elastic than that of nicotine addicted smokers.

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Reference
Ahmed, R., Diener, A., & Bahri, S. (2019). Retailer Compliance as a Predictor of Youth
Smoking Participant and Consumption. Journal of School Health, 89(2), 115-123.
Corrigan, J. R., O'Connor, R. J., & Rousu, M. C. (2020). Which smokers adopt e-cigarettes and
at what price? An experimental estimation of price elasticity of demand and factors
correlated with e-cigarette adoption. Addictive Behaviors, 106324.
Jawad, M., Lee, J. T., Glantz, S., & Millett, C. (2018). Price elasticity of demand of non-cigarette
tobacco products: a systematic review and meta-analysis. Tobacco control, 27(6), 689-
695.
Stoklosa, M., Drope, J., & Chaloupka, F. J. (2016). Prices and e-cigarette demand: evidence from
the European Union. Nicotine & Tobacco Research, 18(10), 1973-1980.