Based on an internet
news “tough laws do not stop rise in Singapore smokers” written by ‘Straits Times Indonesia’ at
http://www.thejakartaglobe.com/health/tough-laws-dont-stop-rise-in-singapore-smokers/424096
on 22 February 2011, Singapore
is a developed country and its citizen’s general level of health is the best in
Asia. Of cause Singapore has its own strategies to control its citizen’s
lifestyle, however, not long ago there is an internet news which heading with
“Tough laws don’t stop rise in Singapore smokers” this eight words. This means
despite steep cigarettes price and restrictive laws were set up, but more and
more people are lighting up in Singapore. A figure shows that year 2010 14.3
per cent of adults smoker there were smoking daily up from 12.6 per cent which
is in year 2004, and the number that increase of daily smokers among young
adults who aged 18 to 29 is even more worse, it rise up to 16.3 per cent in
2010 from 12.3 per cent in 2004 (data comes from the National Health Survey).
The taxes of cigarettes raised to S$ 352 from S$ 293 in 2005 for every 1,000 of
cigarettes imported, the raised of cigarettes price caused a pack of smokes to
the current average of S$ 12, this made Singapore become one of the world’s
most expensive places to light up
cigarettes.
Even thought the
percentage change in quantity demanded and the percentage change in price have
not given in this internet news, but readers still can get the correct answer
of price elasticity of demand of cigarettes in Singapore. Very obvious, the
price elasticity of demand is inelastic, because even government of Singapore
set the hard rules and higher tax on cigarettes, the quantity demand for
cigarettes remain the same and even more and more. Why government action can’t
decrease the consumption of cigarettes, elasticity can explain it. Elasticity
this word in economics’ view is responsiveness, price elasticity of demand can
be seen as a responsiveness of the quantity demanded of a good to a change in
its price when all other influences on buying plans remain the same. To
calculate the price elasticity of demand need to use a particular formula and
the formula is % change in quantity demanded divide by % change in price. To
calculate the figure of % change in quantity demanded is the quantity change
divide by average quantity demanded; to calculate the figure of % change in
price is the price change divide by average price. Call the percentage change
in the quantity demand %ΔQ and percentage change in the price %ΔP, then the
formula will look like: %ΔQ= ΔQ/Qave ×
100, %ΔP= ΔP/Pave ×100. By the way of
using percentage of average price and average quantity, can get value for the
elasticity regardless of the price falls or rises. Inelastic and elastic demands
divide into five, which are perfectly inelastic demand,
inelastic demand, unit
elastic demand, perfectly elastic demand and elastic demand.
Perfectly
inelastic demand
|
After knowing the
price elasticity of demand, producers can easily know about the change in total
revenue is increase or decrease if cut down the price of the good and it is
depends to the elasticity of demand. If demand is elastic, a figure of price
cut would increase the quantity sold by more than the price cut, so total
revenue is increase. If demand is inelastic, a figure of price cut would increase
the quantity sold by less than the price cut, therefore total revenue decrease.
When the demand is unit elastic, a figure of price cut is equal to the increase
of quantity sold, then the total revenue does not change. The following graph
is the evidence of a cut in the price does not always means the total revenue
is decrease.
When the price
elasticity of demand of a good is between zero and one, the demand of the good
is inelastic demand. A price cut to an inelastic demand would not increase the
total revenue; on contrast a rise to the price would increase the total
revenue. Demand of cigarettes is inelastic, as a result, responsiveness to the
change in price is not obvious, so the government set a high tax to cigarettes
is very difficult to decrease the quantity demanded of cigarettes. All in all, I
don’t agree with the action of government, because government should not only
increase the tax of cigarettes in order to stop their citizen to smoke,
government should also do other things such as stop giving medical subsidy to
smokers, and used the money that save from smokers to held some healthy campaign
to avoid citizen get addicted to cigarettes.
Written by: Hoo Kien Meng
do u mind to share the reference site?
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