🞄 cigarettes are a demerit good and so their consumption should be reduced

🞄 a higher price could discourage people from smoking (paragraph ➍)

🞄 the imposition of a minimum price could save lives (paragraph ➌)
🞄 the costs of health care could be reduced
🞄 negative externalities such as passive smoking will be reduced
🞄 a higher price will particularly discourage young people (paragraph
➍), whose demand is likely to be more elastic because they earn lower incomes.

Arguments against:
🞄 informal (parallel/underground/black) markets may appear, reducing
the effectiveness of the minimum price
🞄 demand for cigarettes is inelastic, so relatively few consumers
will be discouraged from smoking (paragraph ➎)
🞄 retailers may suffer through fewer sales
🞄 a minimum price may be difficult to enforce
🞄 the option of increasing indirect tax on tobacco may be more effective and adds
to state resources for implementing alternative policies (paragraph ➊)
🞄 state financing of education campaigns, persuasion through further advertising,
provision of medical advice and counselling support may be better than minimum
price
🞄 price controls reduce freedom of choice for consumers and producers
🞄 the cost of living will increase for consumers who buy cigarettes
🞄 distributional effects because lower income households’ real incomes will fall
more.
Effective evaluation may be to:
🞄 consider short-term versus long-term consequences
🞄 examine the impact on different stakeholders
🞄 discuss advantages and disadvantages
🞄 prioritize the arguments.

cigarettes are a demerit good and so their consumption should be reduced

it is understood that cigarettes can have a significant impact on people’s health. Smoking cigarettes are not
only harmful to the smoker, its also harmful to other people around.
- In theory, by introducing a price floor the quantity demanded will decrease as people are less willing
and able to afforded it. However, in reality this theory may not fully apply as cigarettes are known to
be addictive and people could find other illegal mean to purchase it such as black markets. Therefore,
in reality the price floor may not be as effective as proposed in theory.
-
- In a short run, despite cigarettes being addictive, it is usually acceptable for most smokers to lower or
stop the consumption of cigarettes. Also, most smokers would have their own stocks of cigarettes. As
we know cigarettes are usually sold in packs, meaning in people could still consume their own stock
before purchasing more at relatively higher price. Therefore in the short run, the quantity demanded
for cigarettes may have a large decrease, although the amount of cigarettes consumed in reality may
 have a smaller decrease than quantity demanded. (price floor less effective)
- In the long run, people would have to purchase more cigarettes either legally or illegally.
The lower price of cigarettes in the black market may incentivize people to purchase illegally, although
most people wouldn’t do this because its illegal after all. Therefore, the majority of the smokers would
have to purchase from legal stores at relatively higher price meaning less people are willing and able
to purchase them, demonstrating the price floor being more effective.