Essay
According to the research paper Cigarettes and Alcohol: Substitutes or Complements?
(Decker & Schwartz, 2020) relationship between Alcohol and cigarettes consumption is complex,
and they can be both a substitute and a compliment to each other. Given the significant health
impacts of these products it’s important to understand how a public policy for one could affect
the consumption of the other. A poorly implemented public policy while reducing the use of one
could increase the demand for the other
This study found that raising the price of alcohol would lower alcohol consumption while
simultaneously lowering smoking rates. This suggests a complimentary relationship between
them. The study also found that raising cigarette prices would reduce smoking while increasing
alcohol consumption. This suggests a substitute relationship between them. The study
demonstrates that Complimentary/Substitute relationships can be complex and not black and
white.
In order to reduce consumption of both alcohol and cigarettes public policy should focus
on reducing alcohol consumption. This will have the effect of reducing both. If policy focuses
on reducing cigarette use they will inadvertently increase drinking having a negative effect on
public health.
Decker and Schwartz’s findings show the complexity of consumer behavior and the
ripple effects a change in one product demand can have on the demand for another.
Understanding the relationship between products is key when trying to create specific
consumer behavior. Utilizing well informed public policy is important to not create unwanted
negative effects.
Decker, S. L., & Schwartz, A. E. (2000). Cigarettes and Alcohol: Substitutes or Complements? National
Bureau of Economic Research Working Paper Series, No. 7535. http://www.nber.org/papers/w7535
Question 1
a)
As people move out of city centers the demand for housing will increase and move towards the right
demand will shift from D1 to D2. The supply of houses will decrease and move towards the left going
from S1 to S2 . This will shift the price equilibrium higher.
b)
We are currently still experiencing a housing supply shortage in our area. While the increase in interest
rates has shifted the demand for homes to the left. The increase has also stopped sellers from selling
which is shifting the supply line to the right. This is causing us to maintain pricing and shortage.
Question 2
a)
The demand for Alert Systems will increase going from D1 to D2. Manufacturers will increase their
production and supply will shift from S1 to S2. Overall volume will increase and prices will remain
steady.
b)
As consumers income increases the demand for generic meds will decrease shifting left from D1 to D2.
Manufacturers will lower manufacturing shifting supply from S1 to S2
C)
The demand for building supplies will remain steady but the shipping issues will cause supply to shift left
from S1 to S2.
D)
A release of oil reserves would cause an increase in supply shifting the graph to the right from S1 to S2.
Demand would remain constant.