Cigarette Addiction

Issac

Literature Review

Introduction: There has been an increasingly negative stigma surrounding cigarette smoking following public education efforts with regards to the detrimental effects of the habit. This social dynamic has produced an environment of increasing costs for cigarette companies in the form of higher specific taxes as well as mandated anti-smoking campaigns. This paper will research whether increases in cigarettes prices due to increased costs faced by the manufacturers will decrease demand significantly or whether the addiction to cigarettes is too strong.

The answer to this question is very interesting because there have been many advocates of the idea of taxing cigarettes heavily in an attempt to augment the demand function of cigarette smoking consumers, with the end result of less cigarette consumption in America. Every year millions of citizens suffer from health care problems ranging from minor health care maladies to death, many of these which would be non-existent with the absence of cigarette smoking. These problems are not solely dealt with by the consenting smoker, however, but also by non-consenting second hand smoke victims and tax payers who have to shoulder the burden that the public health care system assumes in the form of health problems from cigarette consumption. Possibly, public policy with regards to cigarette taxation and reallocation may be made more accurately with the results of this study.

Review of the Literature: The necessary data relating to this topic, specifically, the average price of a pack of cigarettes nationally, measured annually and the national consumption of cigarettes also measured annually was obtained from the Federal Trade Commission's Cigarette Report for 2002, which produces estimates of these data from the years 1963-2002.

Table 1. US cigarette prices, advertising expenditures, and consumption, 1986Ð'-2000

Real cigarette price Real media expenditures (thousands Cigarette consumption

Year (November 1998 dollars)a of November 1998 dollars)b per capita (packs/year)c

1986 $1.44 $1 929 007 161.4

1987 $1.49 $1 713 238 157.9

1988 $1.56 $1 736 165 147.1

1989 $1.68 $1 727 042 141.0

1990 $1.76 $1 778 480 138.3

1991 $1.89 $1 635 072 130.2

1992 $1.99 $1 356 858 132.1

1993 $2.01 $1 247 617 119.0

1994 $1.88 $1 114 433 124.1

1995 $1.88 $1 057 222