Suppose a public referendum is being held on whether or not to levy a tax on cigarettes Currently, the supply of cigarettes is given by Qs 100 6P You estimate the demand for cigarettes to be Qd 200 2P You are asked to evaluate the likely effects of a tax on cigarettes equal to $10 per pack of cigarettes What is the equilibrium price and quantity of cigarettes What is the price elasticity of demand for cigarettes at the equilibrium price What is the price elasticity of supply of cigarettes at the equilibrium price What proportion of the tax will be paid by sellers

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Question: Suppose a public referendum is being held on whether or not to levy a tax on cigarettes.Currently, the supply of cigarettes is given by Qs

Suppose a public referendum is being held on whether or not to levy a tax on cigarettes.Currently, the supply of cigarettes is given by Qs = -100 + 6P.You estimate the demand for cigarettes to be Qd = 200 - 2P.

You are asked to evaluate the likely effects of a tax on cigarettes equal to$10per pack of cigarettes.

What is the equilibrium price and quantity of cigarettes?
What is the price elasticity of demand for cigarettes at the equilibrium price?
What is the price elasticity of supply of cigarettes at the equilibrium price?
What proportion of the tax will be paid by sellers?

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