As price decreases and we move downward along the market demand for cigarettes, the quantity of cigarettes demanded increases for two reasons. First, people who smoked cigarettes at the original price respond to the lower price by smoking more. Second, some people start smoking.

In the United States, cigarette taxes vary across states, and studies of cigarette consumption patterns show that higher taxes mean less cigarette consumption by youths. Using data from the Youth Risk Behavior Surveys (YSBS), one study shows that increases in state cigarette taxes between 1990 and 2005 resulted in less participation (fewer smokers) and lower frequency (fewer cigarettes per smoker).

A change in cigarette taxes in Canada illustrates the second effect, the new-smoker effect. In 1994, several provinces in eastern Canada cut their cigarette taxes in response to the smuggling of cigarettes from the United States (where taxes are lower), and the price of cigarettes in the provinces decreased by roughly 50 percent. Researchers tracked the choices of 591 youths from the Waterloo Smoking Prevention Program and concluded that the lower price increased the smoking rate by roughly 17 percent.

Question.

What is the law of demand?