SEU Two Ways to Reduce the Quantity of Smoking Demanded Case

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‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 1
Macroeconomics (ECON 201)
Due Date:16 March 2022 @ 23:59
Course Name: Macroeconomics
Student’s Name:
Course Code: ECON201
Student’s ID Number:
Semester: II
CRN:
Academic Year:2021-22-2nd
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: 00 / 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY








The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students
or other resources without proper referencing will result in ZERO marks. No
exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced)
font. No pictures containing text will be accepted and will be considered
plagiarism).
Submissions without this cover page will NOT be accepted.
Chapter 4 & 6: Case Study: Supply, Demand, and Market Equilibrium: (10 Points)
In the first assignment for the Macroeconomics course, the students are required to choose a specific area from
the subject and answer the questions given, upon successful completion of the assignment; the student should
be able to achieve the following learning outcomes:
Learning Outcomes:
1. Define the institutional framework of macroeconomic policymaking. [CLO 1.1]
2. Analyze economic problems within the conceptual framework of mainstream macroeconomics.
[CLO 2.1]
Reference Source:
Textbook: – Mankiw, N. Gregory. Principles of Macroeconomics, 6th ed. Mason, OH: South-Western
Cengage Learning, 2011. ISBN: 9780538453066 (hard copy); ISBN: 9781115468523 (eBook)
Case Study:1 (5 Points)
Please read the case “Two Ways to Reduce the Quantity of Smoking Demanded” from Chapter 4
“Supply, Demand, and Market Equilibrium” Page: – 71 given in your textbook – “Principles of
Macroeconomics”. The case study presented in the chapter discussed cigarette taxes as a way to reduce
smoking. Now think about the markets for other tobacco product such as cigars and chewing tobacco. and
Answer the following Questions:
Questions:
1.1. Are these goods substitutes or compliments for cigarettes? (100 – 150 words – 1.25 point)
1.2.Using a supply and demand diagram, show what happens in the markets for cigars and chewing
tobacco if the tax on cigarettes is increased. (100 – 150 words – 1.25 point)
1.3.If policy makers wanted to reduce total tobacco consumption, what policies could they combine
with the cigarette tax? (100 – 150 words – 1.25 point)
1.4.How can we reduce the consumption of cigarettes in economics? (100 – 150 words – 1.25 point)
Important Note: – Support your submission with course material concepts, principles, and
theories from the textbook and at least two scholarly, peer-reviewed journal articles.
Case Study:2 (5 Points)
Please read the case “The Minimum Wage” from Chapter 6 “Supply, Demand, and Government
Policies” Page: – 117 given in your textbook – “Principles of Macroeconomics”. A case study
discusses the federal minimum-wage law.
Questions:
2.1.Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor.
Using a supply and-demand diagram of the market for unskilled labor, show the market wage,
the number of workers who are employed, and the number of workers who are unemployed.
Also show the total wage payments to unskilled workers. (100 – 150 words – 1.25 point)
2.2.Now suppose the secretary of labor proposes an increase in the minimum wage. What effect
would this increase have on employment? Does the change in employment depend on the
elasticity of demand, the elasticity of supply, both elasticities, or neither? (100 – 150 words –
1.25 point)
2.3.What effect would this increase in the minimum wage have on unemployment? Does the change
in unemployment depend on the elasticity of demand, the elasticity of supply, both elasticities, or
neither? (100 – 150 words – 1.25 point)
2.4.If the demand for unskilled labor were inelastic, would the proposed increase in the minimum
wage raise or lower total wage payments to unskilled workers? Would your answer change if the
demand for unskilled labor were elastic? (100 – 150 words – 1.25 point)
Important Note: – Support your submission with course material concepts, principles, and
theories from the textbook and at least two scholarly, peer-reviewed journal articles.
Answer:
Your expectations about the fuhire may affect your demand for
a good or service today. If you expect to eam a higher income next month, you
may choose to save less now and spend more of your current income buying ice
cream. If you expect the price of ice cream to fall tomorrow, you may be less willing to buy an ice-cream cone at today’s price.
Expectations
Number of Buyers In addition to the preceding factors, which influence the
behavior of individual buyers, market demand depends on the number of these
buyers. If Peter were to join Catherine and Nicholas as another consumer of ice
cream, the quantity demanded in the market would be higher at every price, and
market demand would increase.
The demand curve shows what happens to the quantity demanded of
that in uence
curve shifts. Table
1 lists the variables
that in uence how much consumers choose to buy of a good.
If you have trouble remembering whether you need to shift or move along the
demand curve, it helps to recall a lesson from the appendix to Chapter 2. A curve
shifts when there is a change in a relevant variable that is not measured on either
axis. Because the price is on the vertical axis, a change in price represents a movement along the demand curve. By contrast, income, the prices of related goods,
tastes, expectations, and the number of buyers are not measured on either axis, so
a change in one of these variables shifts the demand curve.
Summary
Two Ways to Reduce the Quantity
g
of Smoking Demanded
g
Public policymakers often want to reduce the amount that people smoke because
of smoking’s adverse health effects. There are two ways that policy can attempt
to achieve this goal.
Oneway to reduce smoking is to shift the demand curve forcigarettes and other
tobacco products. Public service announcements, mandatory health warnings on
cigarette packages, and the prohibition of cigarette advertising on television are
all policies aimed at reducing the quantity of cigarettes demanded at any given
price. 1f successful, these policies shift the demand curve for cigarettes to the left,
as in panel (a) of Figure 4.
Price of the good itself
Represents
‘ncome
Shms the demand curve
:01
t
.
Shifts the demand curve
Tastes
Shifts the demand curve
Expectations
Shifts the demand curve
Number of buyers
Shifts the demand curve
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variables Th3‘ Influeinu Buyers
Thls table Ilsts the varlables that
affect how much consumers choose
to buy of any good. Notice the
specia| r°|e that the price of the
good plays: A change in the good’s
price represents a movement
along the demand curve, whereas
a change in one ofthe other
variables shifts the demand curve.
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a movement along the demand curve
Prices of related goods
’fi’
5
. . .
fl
A Change in This Variable
t
Table 1
fl
Variable
.
awe».
fi
a good when its price varies, holding constant all the other variables
buyers. When one of these other variables changes, the demand
.t

l
4
Shifts i” the Demand
curve versus Movemen“
a|°ng the Demand curve
If warnings on cigarette packages convince smokers to smoke less, the demand curve
for cigarettes shifts to the left. In panel (a), the demand curve shifts from D, to D2. At
a price of $2.00 per pack, the quantity demanded falls from 20 to 10 cigarettes per
day, as re ected by the shift from point A to point B. By contrast, if a tax raises the
price of cigarettes, the demand curve does not shift. Instead, we observe a movement
to a different point on the demand curve. ln panel (b), when the price rises from $2.00
to $4.00, the quantity demanded falls from 20 to 12 cigarettes per day, as re ected by
the movement from point A to point C.
fi
Figure
(a) A Shift in the Demand Curve
Price
of
A P°ii
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