Answer to Question #344263 in Microeconomics for mazza

Question

what might cause an increase in demand for conventional cigarettes

Answer 1

Demand is the total amount of goods and services that consumers are willing and able to purchase at a given price in a given time period. The Law of Demand states that as the price of a product falls, the quantity demanded of the product will usually increase, ceteris paribus. Cigarettes typically have an inelastic demand, which means that a certain percentage change in price leads to a smaller percentage change in quantity demanded. When demand increases, the demand curve shifts to the right. At each same price, quantity demanded is increased. Given that supply does not change, the equilibrium will occur at a higher price and higher quantity demanded.An increase in demand for cigarettes may be caused by an increase in disposable income enjoyed by consumers, effective advertising campaigns launched by sellers, or an increase in the population size of a certain economy. The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. As incomes increase, demand of cigarettes will likely increase, as more people will be more willing and able to by at higher prices. Advertising can affect the tastes and preferences of consumers. When cigarette advertising is effective, people may be more willing to forego substitutes or afford other opportunity costs in order to consumer higher quantities of cigarettes. Finally, an increase in population size may also shift the demand curve to the right as the total number of consumers increases, and, thus, the aggregate quantity of cigarettes demanded would most likely also increase.