The Economic Analysis of Shortage in the Low-end Cigarettes

It is an important issue recently for China tobacco industry to keep appropriate balance between supply and demand in the low-end cigarettes. The existing analysis argues mainly that the shortage of low-end cigarettes resulted from the exterior factors such as excise tax increasing, tobacco leaf and supplies appreciating but this paper will reveal four new reasons resulted in the shortage from the interior of tobacco industry itself through theoretic and empirical analyzing. Furthermore, a review on measures that release shortage will be given and an optimal solution is also suggested.