describe the effects on cigarette consumption,using supply demand framework, of a anti-smoking media campaign and price support program for tobacco farmers that raise price of tobacco above equilibrium. explain in details.
To describe the effects on cigarette consumption using a supply and demand framework, let's break down the impact of two factors: an anti-smoking media campaign and a price support program for tobacco farmers that raises the price of tobacco above equilibrium.
1. Anti-smoking media campaign:
An anti-smoking media campaign aims to reduce cigarette consumption by raising awareness about the harmful effects of smoking. This falls under the category of demand-side factors, meaning it affects the willingness and ability of consumers to buy cigarettes.
Demand-side factors:
The anti-smoking media campaign can shift the demand curve for cigarettes to the left. As more people are exposed to the negative consequences of smoking, their demand for cigarettes diminishes, resulting in a decrease in quantity demanded. This shift reduces both the equilibrium price and quantity of cigarettes.
Equilibrium price and quantity:
The equilibrium price is determined by the intersection of the demand and supply curves. With a reduced demand due to the anti-smoking media campaign, the demand curve shifts leftward, crossing the supply curve at a lower quantity and price, indicating a reduction in cigarette consumption.
Effects on cigarette consumption:
The anti-smoking media campaign leads to a decline in both the price and quantity of cigarettes consumed. This effect is driven by a decrease in consumer demand resulting from the campaign's efforts to deter smoking. As a result, the campaign contributes to a reduction in cigarette consumption rates.
2. Price support program for tobacco farmers:
A price support program is a government policy aimed at providing financial assistance to producers. It sets a minimum price for tobacco, typically above the equilibrium price, to ensure farmers receive a fair income for their crops. This policy falls under the category of supply-side factors, meaning it impacts the production and supply of cigarettes.
Supply-side factors:
The price support program raises the cost of production for tobacco farmers, which can lead to an increase in the supply curve for cigarettes. When the cost of production rises, tobacco farmers may be encouraged to produce more to offset their increased costs, resulting in an increased quantity supplied.
Equilibrium price and quantity:
As the supply curve shifts to the right due to the price support program, it intersects with the demand curve at a higher quantity and price compared to the original equilibrium. The new equilibrium lies at a higher price and quantity, indicating an increase in cigarette consumption.
Effects on cigarette consumption:
The price support program, by raising the price of tobacco above equilibrium, encourages tobacco farmers to produce more, leading to an increase in the quantity of cigarettes supplied. This can offset the impact of the anti-smoking media campaign, partially mitigating the reduction in cigarette consumption caused by the campaign.
In summary, while an anti-smoking media campaign decreases cigarette consumption by reducing demand, a price support program for tobacco farmers can partially offset this reduction by increasing supply. However, the overall impact will depend on the relative strengths of these two factors and other associated variables.