EMILIOAGUINALDOCOLLEGE

Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph

SCHOOL OF DENTAL MEDICINE

Health Economics with Taxation and Reform (AEG1100)
Week 5: Application of Supply and Demand
Worksheet

Name:______________________________________________________________________
__ Section: ________
[LAST NAME] [FIRST NAME] [M.I.]

Note: Please print this worksheet back to back on a SHORT bond paper.
Instructions: Answer the following questions below based on the cases given.

Case #1:

Using supply and demand concepts to control smoking among teenagers.

Quantitative assessment: evaluate each option economically. Study the effects of each option
on the supply and demand curves. You may use graphs and explain it below
Option 1
Implementing a Tax on Tobacco Products

Supply Curve: Implementing a tax on tobacco products increases the production cost for
tobacco companies, leading to a leftward shift in the supply curve. This shift reduces the
quantity supplied at every given price level.

Demand Curve: The demand for tobacco products among teenagers is often relatively
inelastic, meaning changes in price have a minimal effect on the quantity demanded.
However, there could still be some reduction in demand due to the increased price resulting
from the tax.

Overall Effect: The combination of a decrease in supply and a potential decrease in demand
due to higher prices is likely to lead to a reduction in smoking among teenagers.
Option 2
Implementing Public Awareness Campaigns and Education Programs.

Supply Curve: This option does not directly affect the supply curve as it focuses on demand-
side interventions.

Demand Curve: Public awareness campaigns and education programs aim to shift the
demand curve for tobacco products to the left by informing teenagers about the dangers of
smoking and promoting healthier lifestyle choices.

Overall Effect: While this option may not directly impact the supply curve, it can lead to a
decrease in demand for tobacco products among teenagers, potentially resulting in reduced
smoking rates.
Option 3
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Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph

SCHOOL OF DENTAL MEDICINE

Enforcing Age Restrictions and Penalties for Underage Smoking

Supply Curve: This option primarily targets the demand side and does not directly affect the
supply curve.

Demand Curve: By enforcing age restrictions and imposing penalties for underage smoking,
the aim is to discourage teenagers from starting or continuing to smoke, thus shifting the
demand curve to the left.

Overall Effect: This option could lead to a decrease in demand for tobacco products among
teenagers, thereby reducing smoking rates.
Qualitative assessment: evaluate the advantages and disadvantages of each option.

Option 1: Implementing a Tax on Tobacco Products

Advantages Disadvantages
• Financial incentive: Higher taxes •
Regressive impact: Tobacco taxes
increase the cost of tobacco products, tend to disproportionately affect low-
making them less affordable, income individuals who may be more
particularly for teenagers with limited likely to smoke, potentially
disposable income. exacerbating socioeconomic
• Revenue generation: Tax revenues disparities.
can be allocated to fund anti-smoking • Black market: Excessive taxes may
campaigns, healthcare initiatives, or drive consumers to seek cheaper
other public services. alternatives through illegal markets,
• Reduced consumption: Higher prices resulting in lost tax revenue and
discourage consumption, potentially increased health risks from
leading to lower smoking rates and unregulated products.
improved public health outcomes. • Opposition from industry: Tobacco
companies may resist tax increases
and lobby against such measures,
posing challenges to implementation
and enforcement.
Option 2: Implementing Public Awareness Campaigns and Education Programs

Advantages
Disadvantages

• Informing the public: Education • Costly and time-consuming:

programs can increase awareness
about the health risks associated with
smoking, empowering individuals to
make informed decisions.
• Behavior change: Effective
campaigns can alter social norms
surrounding smoking, reducing its
social acceptability and prevalence.
• Long-term impact: Education
initiatives can have lasting effects on
attitudes towards smoking, potentially
leading to sustained reductions in
tobacco use.
Developing and implementing
comprehensive public awareness
campaigns requires significant
resources and may take time to yield
measurable results.
• Limited effectiveness: Some
individuals may remain unaffected by
educational efforts, particularly those
heavily addicted to nicotine or
resistant to change.
• Influence of industry: Tobacco
companies may attempt to undermine
or discredit public health messages to
 EMILIOAGUINALDOCOLLEGE
Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph

SCHOOL OF DENTAL MEDICINE

protect their interests, potentially
undermining the effectiveness of the
campaigns.

Option 3: Enforcing Age Restrictions and Penalties for Underage Smoking

Advantages
Disadvantages

• Prevention of early initiation: Strict • Enforcement challenges: It can be

enforcement of age restrictions makes
it more difficult for teenagers to
access tobacco products, reducing
the likelihood of them becoming
smokers.
• Deterrent effect: Penalties for
underage smoking, such as fines or
community service, can discourage
teenagers from engaging in illegal
behavior.
• Compliance with regulations: Effective
enforcement promotes adherence to
existing laws and regulations,
supporting broader public health
objectives.
difficult to effectively enforce age
restrictions, particularly given the
prevalence of online sales and illicit
distribution channels.
• Stigmatization: Punitive measures
may stigmatize and alienate underage
smokers, potentially exacerbating
social and psychological issues.
• Limited impact on established
smokers: Enforcing age restrictions
primarily targets new initiates and
may have limited effectiveness in
reducing smoking rates among
existing smokers.
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Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph

SCHOOL OF DENTAL MEDICINE

Case #2:

Supply and demand for Hepa B vaccine.

I. Quantitative assessment: evaluate each option economically. Study the effects

of each option on the supply and demand curves. You may use graphs and
explain it below
Option 1
International Aid and Cooperation
Effect on Supply Curve: International aid and cooperation can potentially increase the supply
of Hepatitis B vaccines by providing resources, funding, and technology transfer to vaccine
manufacturers in countries where production capacity is limited. This would result in a
rightward shift of the supply curve, indicating an increase in the quantity supplied at every
given price level.
Effect on Demand Curve: International aid and cooperation may also indirectly influence the
demand for Hepatitis B vaccines by improving access to healthcare services, raising
awareness about the importance of vaccination, and reducing barriers to vaccination. This
could lead to a potential rightward shift of the demand curve, indicating an increase in the
quantity demanded at every given price level.

Option 2
Increasing Production Capacity
Effect on Supply Curve: Increasing production capacity directly addresses the supply side of
the Hepatitis B vaccine market. By expanding manufacturing facilities, investing in
technology, and training personnel, the production capacity of the vaccine can be increased.
This would result in a rightward shift of the supply curve, indicating an increase in the quantity
supplied at every given price level.
Effect on Demand Curve: While increasing production capacity does not directly affect
demand, it can indirectly influence demand by ensuring an adequate supply of vaccines to
meet existing and potential demand. This may lead to increased confidence among
consumers and healthcare providers, potentially contributing to a rightward shift of the
demand curve as well.

Option 3
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Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph

SCHOOL OF DENTAL MEDICINE

Government Subsidies for Vaccine Production
Effect on Supply Curve: Government subsidies for vaccine production can reduce the cost of
production for manufacturers, incentivizing them to produce more vaccines. This would result
in a rightward shift of the supply curve, indicating an increase in the quantity supplied at every
given price level.
Effect on Demand Curve: Subsidies can also make vaccines more affordable for consumers,
potentially increasing demand. Lower prices resulting from subsidies can lead to higher
vaccination rates, especially among lower-income populations. This could contribute to a
rightward shift of the demand curve, indicating an increase in the quantity demanded at every
given price level.

II. Qualitative assessment: evaluate the advantages and disadvantages of each

option.

Option 1: International Aid and Cooperation

Advantages
• Increased Supply: Facilitates the
transfer of resources, technology, and
funding to regions with limited vaccine
production capacity, bolstering the
overall supply of Hepatitis B vaccines.
• Improved Access: Collaboration with
international organizations enhances
access to vaccines in underserved
regions, reducing healthcare
disparities and promoting global
health equity.
• Cost Sharing: Shared financial burden
among multiple countries and
organizations enables the scaling up
of vaccination efforts, benefiting both
donors and recipients.
Disadvantages
• Dependency: Reliance on
international aid may inhibit efforts to
develop sustainable healthcare
infrastructure and self-sufficiency in
recipient countries.
• Political Challenges: International aid
initiatives may encounter diplomatic
tensions, bureaucratic hurdles, and
conflicting priorities among donor
countries and organizations.
• Inequitable Distribution: Despite
efforts to promote equitable access,
challenges may persist in ensuring
vaccines reach the most vulnerable
populations, leading to disparities in
coverage and health outcomes.

Option 2: Increasing Production Capacity

Advantages
• Scalability: Investment in expanding
production capacity allows for a
flexible response to rising demand,
ensuring sufficient supply to meet
global health needs.
• Long-Term Sustainability:
Strengthening local vaccine
production capabilities reduces
reliance on imports, contributing to
sustainable healthcare infrastructure.
• Economic Benefits: Expansion of
production capacity creates jobs,
Disadvantages
• Initial Costs: Significant upfront
investments in infrastructure,
technology, and workforce training
may pose financial challenges for
manufacturers and governments.
• Time Constraints: Building or
upgrading manufacturing facilities is
time-consuming, potentially delaying
the availability of additional vaccine
supply.
• Overproduction Risks: Expansion
without proper demand forecasting
 EMILIOAGUINALDOCOLLEGE
Gov. D. Mangubat Ave., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4339/41 www.eac.edu.ph
SCHOOL OF DENTAL MEDICINE
drives economic growth, and fosters
innovation in the vaccine
manufacturing sector, benefiting local
and global economies.
Option 3: Government Subsidies for Vaccine Production
Advantages
• Cost Reduction: Subsidies lower
production costs, making vaccines
more affordable and accessible to
healthcare providers and consumers.
• Market Stability: Stable income for
vaccine producers mitigates financial
risks associated with market
fluctuations, ensuring consistent
supply.
• Public Health Impact: Lower vaccine
prices from subsidies can increase
vaccination rates, reducing Hepatitis
B incidence and associated health
burdens.
may lead to overproduction and
wastage, resulting in financial losses
and inefficiencies.
Disadvantages
• Budget Constraints: Subsidies strain
public budgets, potentially competing
with other healthcare priorities and
social programs.
• Market Distortion: Subsidies may
disrupt market dynamics, artificially
lowering prices and discouraging
competition and innovation.
• Sustainability Concerns: Continued
reliance on subsidies raises questions
about long-term sustainability,
necessitating viable exit strategies or
alternative financing mechanisms.