Assignment
Taxing French smokers President Chirac has called for 2004 to be a ‘year of results' in terms of fulfilling his pledge to French electors in 2002 to cut smoking by 30% among young people and by 20% among adults within 5 years. To the delight of campaigners, cigarettes sales in France are estimated to have fallen 12-13% in 2003, following a 3.5% fall in 2002. The cumulative impact of tax rises, i.e. 8.6% in 2002, 11% in January 2003, 20% in October 2003 and 8-10% in January 2004 - is starting to bite. Studies consistently show that taxation and pregnancy are the two most effective ways of stopping smoking. The chairman of the French Alliance Versus Tobacco, an umbrella organisation for 29 anti-smoking helplines, Gerard Dubois, said that it was unprecedented and that calls to quit-smoking helplines have risen seven-fold in the past year. Also, sales of nicotine gum and patches, made by pharmaceutical giants such as GSK and Pfizer, have increased 89% in the year to September, while turnover of Zyban, an antidepressant taken by many people giving up smoking, is up 20%. Campaigners regret, however, that the government is not pressing its advantage further. The political clout of France's 32,000 tobacconists, furious that French cigarettes are now the most expensive in the EU after those sold in the UK, has prompted Jean-Pierre Raffarin, prime minister, to promise a four-year freeze on cigarette duties. This is expected to apply from this year. The concession to powerful buralistes is the latest measure to pacify this group of opinion formers ahead of this year's elections. As many of France's 11 million smokers pass through their local tobac on a regular basis, their owners, who often run bars and small bistros on the side, are in a position to bend the ear of a large proportion of the electorate. After the January 2004 8-10% increase in cigarette taxes, the average pack of 20 costs around e5 ($5.85, £3.50) in France, compared with just e2.50 in neighboring Spain and e2.90 in Luxembourg. The French government estimates that more than a third of French adult's smoke, of whom half want to stop. France also has the highest proportion of young smokers in Europe, with 53% of 15-24-year-olds counting themselves as regular smokers, compared with an EU average of 41%.
Question
1 What does the case study tell us about the price elasticity of demand for cigarettes in France?
2 Consider some of the implications for other products of raising taxes sharply on French cigarettes.
3 Can you identify any constraints for the French government in seeking to raise cigarette taxes still further?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.