Cases For Publication (UCWC101)
Abstract

ELASTICITY OF DEMAND AND THE ECONOMICS OF SMOKING: AS CASE STUDY OF INDONESIA

SYED OMAR SYED AGIL
AMID SAMBO TARIGAN

This case attempts to highlight the seriousness of smoking in Indonesia on health and on the poor and what has been done by the government to influence the level of cigarette consumption. The effectiveness of the recent increase in tax on cigarettes is related to the elasticity of demand in economics. Since the price elasticity of demand for cigarette is inelastic the amount of tax and the resultant increase in price will not cause a significant reduction in the quantity demanded for cigarettes. If this is the case the motive of the government to increase tax on cigarettes in order to reduce smoking and improve health and poverty conditions in Indonesia will be ineffective. This case is suitable for undergraduate and postgraduate courses in economics when discussing the price elasticity of demand.