The tax on cigarettes has risen from 39 to $1.01 a packan increase of 62 a pack.
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The tax on cigarettes has risen from 39¢ to $1.01 a pack—an increase of 62¢ a pack. Before the tax hike, cigarettes were $5 a pack. In the past, a price increase of 10 percent cut cigarette consumption by 4 percent. With this new tax, at least 1 million of the 45 million smokers are expected to quit. Is the demand for cigarettes elastic or inelastic? Will the price rise to $5.62 a pack? Who pays most of the tax increase—smokers or tobacco companies?
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If a 10 percent price increase decreases consumption by 4 percent the price elasticity of d...View the full answer
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