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Words: | Submitted: Mon Jun 19 2006
... cigarettes increases (this means the price of all brands of cigarettes generally increase) the demand for substitute goods will increase, however there are not many substitute goods for cigarettes other than cigars, but cigars are generally more expensive than cigarettes. Thus as price of cigarettes increases the change in demand will fall but less than the change in price due to it being price inelastic as mentioned before. Another determinant of demand is income. "As peoples incomes rises, their demand for most goods will rise" (Sloman fifth edition page 32). In this case as the income of consumer rises so does the demand for cigarettes as an extra proportion of their income can be spent on buying more cigarettes. However if consumer's income decreases the quantity demanded decreases by a smaller percentage than price. Lastly another determinant of demand that is relevant for cigarettes is taste. Taste as a determinant is ...
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