Supply and demand

Economics 3

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QUESTION ONE:

supply and demandDemand curve

On the vertical axis is the price of the commodities. On the horizontal axis is the quantities of the commodities that are demanded. In case the tobacco is sold on a purely competitive market, the demand of the products will be as illustrated in the diagram above. This is where the people will demand high commodities at the low prices which are offered. On the other hand, at high prices, the amounts of quantity of the items that are demanded are low. This is the reason for the sloping curve of the demand curve. Low prices have high demands while high prices have low demands.

Supply curve

supply and demand 1

The supply curve is the opposite of the demand curve. This is where the company is willing to supply the commodities at low prices. The company is also willing to supply high quantities at the high prices. This is the reason for an upward sloping curve. The growing gradient is indicative of the increase in the amount of quantity that the company is willing to sell to the market with the increasing prices of the items.

The market equilibrium is shown by the point of intersection of the demand and the supply curves. This is the price and quantity that dominates the market.

Equilibrium price and quantity

supply and demand 2

The point of intersection of the demand and the supply curve is the equilibrium price and quantity. This is the market price for the quantities that are supplied. At this price, the buyers are willing to buy while the sellers are willing to sell the commodities. As indicated, the point of intersection of the dotted lines is the equilibrium. This reads at equilibrium quantity and price. This is the price, as pointed out that the company is willing to sell and supply its commodities at to get the utmost returns. On the other hand, it is the point that the buyers are willing to buy the products at. This is therefore the equilibrium market price of the commodities.

Effects of an increase in sales tax

Increase in the sales tax will result to an increase in the price of the commodity. This is as shown below.

supply and demand 3

As indicated, increase in the taxes wound result to the same quantity of produce being supplied at a higher price as compared to before the increase. This is because the suppliers will be aiming and seeking to meet the additional costs that are incurred by increase in the tax expense. This increases the equilibrium price of the items.

3. a. The demand of tobacco is elastic. This is because a slight change in the price results to a change in the price as indicated in the demand curve results to a massive change in the quantity demanded. This is because people can shift their consumption to other products that are in the markets. Increase in the prices would make the people to reduce the amount of cigarettes and tobacco that they consume. A reduction in the price of the tobacco would see to it that there is an increase in the quantity that is demanded and that is supplied to the market. This therefore indicates that the tobacco has an elastic demand curve.

b. In the case of the sales tax would see to it that the price of the tobacco is raised by the suppliers. This is for the sake of them recouping the amounts of costs that have been increased by the incidence of the tax. This makes the people to all feel the effects of the taxation process. They will therefore pay more for the same quantity of commodities. They will also get smaller quantities of commodities for a certain amount of money than they got before. This therefore results to a strain in their pockets and to their personal budgets. This is as tabulated below where the equilibrium price increases for the items. There is no gainer in the tax increase. This is because all parties, both the demanders and the suppliers are affected by the raised prices that are necessitated by the tax increments.

supply and demand 4

4. Other than increases in the taxes, there are several other policies that can be employed by the government so as to reduce the levels of smoking among the people. The first can be a sensitization campaign as to the effects of smoking. This can be run in the media and the press. Through such posts as in the newspapers and also in the televisions and other media of advertising, the government can tell the people through the avenues of the effects of smoking to their personal health.

The government can also put in place rehabilitation facilities to help people suffering from the problem of addiction to the cigarettes. This can aid in reducing the rate of prevalence and effects of the tobacco smoking to the population. Through rehabilitation centers, the government will be able to treat people previously suffering from addiction. Rehabilitation centers not only help the people who are suffering from addiction but those constantly using tobacco and would like to stop. This will reduce the number of the people who are using tobacco in the country. The centers should also be very accessible to the people. Through accessibility, people will be free and comfortable to be educated and treated with utmost ease. This is to the better of the reduction campaign.

The government can also ban the smoking of tobacco in public areas such as schools, playgrounds, in front of children and bus stations. This is to reduce the cases of new smokers which has been one of the leading reasons for the continued prevalence. This will reduce the exposure of non-smokers to the smoke and tobacco from the smokers. Most prone areas include schools and colleges. This is where people are introduced to the smoking of tobacco. Will adequate measures in place, the rate of prevalence and tobacco will greatly reduce. This will be to the better of the community and the standards.

References

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