demand back to the left, perhaps with public programs to discourage cigarette use or to help people to quit. For

example, anti-smoking advertising campaigns have shown some ability to reduce smoking. However, if
cigarette demand were more elastic, as in Figure 5.9 (b), then an increase in taxes that shifts supply from S0 to
S1 and equilibrium from E0 to E1 would reduce the quantity of cigarettes smoked substantially. Youth smoking
seems to be more elastic than adult smoking—that is, the quantity of youth smoking will fall by a greater

percentage than the quantity of adult smoking in response to a given percentage increase in price.

FIGURE 5.9 Passing along Higher Costs to Consumers Higher costs, like a higher tax on cigarette companies for

the example we gave in the text, lead supply to shift to the left. This shift is identical in (a) and (b). However, in (a),

where demand is inelastic, companies largely can pass the cost increase along to consumers in the form of higher
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