Principles of Economics- Mankiw (5th) 69

Principles of Economics- Mankiw (5th) 69 - CHAPTER 4 T H E...

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CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 73 CASE STUDY TWO WAYS TO REDUCE THE QUANTITY OF SMOKING DEMANDED Public policymakers often want to reduce the amount that people smoke. There are two ways that policy can attempt to achieve this goal. One way to reduce smoking is to shift the demand curve for cigarettes and other tobacco products. Public service announcements, mandatory health warn- ings on cigarette packages, and the prohibition of cigarette advertising on tele- vision are all policies aimed at reducing the quantity of cigarettes demanded at any given price. If successful, these policies shift the demand curve for ciga- rettes to the left, as in panel (a) of Figure 4-4. Alternatively, policymakers can try to raise the price of cigarettes. If the government taxes the manufacture of cigarettes, for example, cigarette compa- nies pass much of this tax on to consumers in the form of higher prices. A higher price encourages smokers to reduce the numbers of cigarettes they smoke. In
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