Aside from the price, the other factors that determine demand have well established and these are: the consumer’s taste or preference, the number of buyers in the market, the consumer’s income, the prices of related goods, and lastly, consumer expectations (McConnell, 2008, p. 47).
The Tobacco Plain Packaging Act received the Royal Assent on Dec. 1, 2011 and the Executive Council of Australia released the Tobacco Plain packaging Regulations 2011 by the 7th of the same month. this statute primarily requires that all tobacco products in the Australian market be sold in plain packaging by the 1st of December 2012. The distinguishing marks between brands will only be the product name in standard color, position, font size and style (Department of Health and Ageing, 2012). Suppose that due to this plain packaging, the consumer’s preference for cigarettes considerably lessens, let us analyze how this will affect the demand for cigarettes in the Australian market.
2. The plain packaging of cigarettes together with the blatant health warnings were less appealing to the consumers, such that they bought lesser quantity of cigarettes. The demand curve shifts to the left.
As the law of supply dictates, as price rises, the quantity supplied rises also just as when the price decreases, so does the quantity supplied. Aside from the price there are other factors that affect the supply and these are the following: the resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market (McConnell, 2008, p. 51).
A study by June, Hammond, Sjödin, Li, Romanoff, and OConnor (2011) found out that cigarette fires are also among the leading causes of death related fires. Suppose that this finding also alarmed the Department of Health and Ageing that it passes a statute that requires cigarettes to be self-extinguishing when not being smoked by consumers.