Economics for Today 9th Edition by Irvin Tucker

Exercise 27

CIGARETTE SMOKING PRICE ELASTICITY OF DEMAND
Applicable Concept: price elasticity of demand
Tobacco use is one of the chief preventable causes of death in the world. Since 1964, health warnings have been mandated in the United States on tobacco advertising, including billboards and printed advertising. In 1971, television advertising was prohibited. Most states have banned smoking in state buildings, and the federal government has restricted smoking in federal offices and military facilities. In 1998, the Senate engaged in heated debate over proposed legislation to curb smoking by teenagers. This bill would have raised the price of cigarettes by $1.10 a pack over five years, and the tobacco industry would have paid $369 billion over the next 25 years. Opponents argued that this price increase would be a massive tax on low-income Americans that would generate huge revenues to finance additional government programs and spending. Proponents countered that the bill was not about taxes. Instead, the bill was an attack on the death march of Americans who die early from tobacco-related diseases. Ultimately, the Senate was so divided on the issue that it was impossible, at least for that year, to pass a tobacco bill.
Estimates of the price elasticity of demand for cigarettes in the United States and other high-income countries fall in the inelastic range of 0.62. This means that if prices rise by 10 percent, cigarette consumption will fall by about 6 percent. Moreover, estimates of the price elasticity of demand range significantly across states from 2.00 (Kentucky) to 0.09 (Mississippi). The price elasticity of demand for cigarettes also appears to vary by education. Less educated adults are more responsive to price changes than better-educated adults. This finding supports the theory that less educated people are more present-oriented, or "myopic," than people with more education. Thus, less educated individuals tend to be more influenced by current changes in the price of a pack of cigarettes. Another study in 2000 confirmed that education has strong negative effects on the quantity of cigarettes smoked, especially for high-income individuals. The presence of young children reduces smoking, with the effect most pronounced for women.
A study published in Health Economics estimated the relationship between cigarette smoking and price for 34,145 respondents aged 15-29. The price elasticity of smoking was inelastic and varied inversely with age: 0.83 for ages 15-17, 0.52 for ages 18-20, 0.37 for ages 21-23, 0.20 for ages 24-26, and 0.09 for ages 27-29. Thus, younger people were more likely to reduce the number of cigarettes smoked in response to increased prices.
According to the above discussion, what factors influence the price elasticity of demand for cigarettes? What other factors not mentioned in the article might influence the price elasticity of demand for cigarettes?