Are taxes an effective way to stop people smoking?

When looking at how taxes impact the demand for any product, it is important to assess how elastic/inelastic consumers are towards price changes. Taxes are a price-changing instrument, and are predominantly used by the government to reduce the consumption of goods with negative externalities ie their is a high marginal social cost to the consumption of the good, as is the case with smoking. However, simple analysis of a demand and supply graph shows that, due to the high inelasticity of demand for cigarettes, tax induced price rises will have a reduced effect on the consumption of cigarettes. In simplistic terms, smokers are addicted to nicotine and are unlikely to dramatically reduce their consumption given price rises.However, that does not mean that taxes are inneffective at stopping people smoking. While they may be ineffective as a price tool, increased taxes allows the government to raise revenues to tackle smoking addiction through different channels. Increased taxes allow the government to supply free kits to smokers to help them stop and allow the government to run national advertising campaigns warning against the dangers of smoking, which are effective tools to help people stop smoking

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Answered by Joss L. Economics tutor

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