South-Westerns' Economic News Summaries
Does not smoking make you fat?
Subject Economists consider the relationship between cigarette taxes and obesity.
Topic Elasticity; Government and the economy; utility and consumer choice
Key Words

weight, cigarette taxes, obesity, smoking

News Story

Since the early 1970s, the percentage of Americans who smoked has fallen from 37 percent to 22.5%. During the same period, the percentage of Americans over the age of 20 who are considered obese has increased from 14% to 30%. Is there a connection?

Some people think so. Since nicotine is a stimulant, it allows smokers to burn calories faster. It's also an appetite suppressant, so smokers eat less. When people stop smoking, their metabolisms slow down. Some argue that the reason French women stayed trim while eating foods high in fat, as made popular in the book French Women Don't Get Fat, is that French women smoke much more than do their American peers. Indeed, economists are beginning to wonder if higher cigarette taxes, intended to get people to stop smoking, are indirectly contributing to increased obesity. It's been documented that as a result of cigarette taxes, a 10% increase in the price of cigarettes will create a 5% reduction in the consumption of cigarettes.

Two economists looked at behavioral data from 1984 to 1999, and found that, while the increase in the number of fast-food restaurants over that period contributed significantly to the increase in obesity, increases in cigarette taxes accounted for about 20% of the obesity increase.

Other economists aren't convinced of the relationship, however. One economist from MIT argues that the relationship is more indirect because there's nothing in the medical literature that indicates that weight people gain when they stop smoking is long-term. In fact, studies indicate that the weight gain is short term, and people take the weight off eventually. If anything, he argues, the impact of cigarette taxes on obesity is negative. He then argues that cigarette taxes should be even higher.

Maybe this has more to do with behavior than just economics. Perhaps people who quit smoking decide to exercise more and lose weight.

Questions
1.

Consider two goods, cigarettes and all other items in your budget, and you have a given income. Draw a budget line indicating the trade-off between cigarettes and all other items. Now impose a tax on cigarettes. What happens to your budget line? Why?

2. Are cigarettes and food complements or substitutes in this article? Why? Be careful in your answer.
3. Based on the information in the article, is demand for cigarettes elastic or inelastic? Why?
Source Daniel Gross. "Cigarettes, Taxes, and Thin French Women." The New York Times, 24 July 2005.

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