Question

2.During the Great Plague of 1665 in London, medical experts claimed that smoking tobacco would prevent a person from catching the disease. Even school children were ordered to smoke during class, and one boy at Eton was whipped for refusing to smoke. What effect did this have on the market for tobacco? Use a supply and demand diagram to explain.(15%)

Answer 1

Mandatory smoking requirement will increase the demand for tobacco. Demand curve shifts to right, increasing both price and quantity.

In following graph, D0 & S0 are initial demand and supply curves, intersecting at equilibrium point A with initial equilibrium price P0 and initial equilibrium quantity Q0. When smoking becomes mandatory, D0 shifts right to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.