The elementary microeconomics tobacco In 1975, France reached a historic high in tobacco consumption: 7 grams per adult per day, more than half a pack of cigarettes. A large majority of men smoke, and they smoke everywhere and all the time.
Since then, consumption has fallen by 60%, mainly among men.
What is it due? Primarily to elementary microeconomics tobacco: its price rises, its consumption is less strong (and vice versa)-at least from the rising price decided by the government in early 1990. Tobacco addiction causing the most severe
among all drugs (heroin alone creates a significant higher), we may even wonder about the existence of the relationship. But microeconomics is true even for
junkies.
The decrease in consumption before the price increase, however: between 1975 and 1985, consumption decreased slightly (10%) without the relative price does not change, reminding us that there are other factors at work. However, the increases decided by the government from the late 1980s will cause a drop in consumption, according to a linear relationship, a scheme worthy of microeconomics 1st year.
Finally, between 1985 and 2008, a 200% increase in tobacco prices has led to a halving of consumption. This is far from negligible for a drug highly addictive like tobacco. Moreover, price elasticity increases: the price increase has a much stronger today than 30 years ago. In 2007, an increase of 1% of the same caused a decrease in consumption of 2%!
At least in appearance, because if you look in detail what has happened since 2004, we see strange things happen.
Between 2003 and 2004, the government has decided to increase the highest ever the price of tobacco: 22%. This increase has completely transformed the relationship between price and consumption in subsequent years. Between 2004 and 2006, consumption falls, while the price drop too. Then, between 2006 and 2008, reappears a linear relationship between price and consumption, but located lower than the previous one and with a "slope" lower: for every price level, consumption is lower and any price increase causes a larger decrease in consumption before 2004.
What happened? The answer is pretty obvious: these consumption figures (due to INSEE) are false. This decrease is a statistical illusion due in part to the use of increasingly widespread tobacco imported illegally into France. According to a study doubtful due to a producer, a cigarette in 4 would now be bought abroad. If the price elasticity is high, simply because a price increase now causes both a decrease in consumption but also an increase in illegal imports.
However, I suppose it is another teaching of elementary microeconomics: the cost of smoking is now so high that all make up even more profitable import of illegal cigarettes, despite prohibitive transaction costs 1 .
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1. Moreover, there has been to create a dual market of nicotine: next to the cigarette market has become a new market, the nicotine "pure" form of "nicorette" and other substitutes. Their effectiveness as a cessation aid seems very relative: there is sustainable consumption of such products, sometimes in conjunction with smoking. So much so that Reynolds considering buying one of the industry leaders. It is, in fact a market whose growth is inversely proportional to that of tobacco. And you can bet that the last increase will restart.
