A tax on Cigarettes introduced in Mexico in 2012 increased the price of Cigarettes by about 10%. An evaluation of the first two years of this measure found that Cigarette consumption fell on average by 7.6%, with a larger decrease (11.7%) in low income households. The study also estimated an increase in consumption of alternatives to smoking, particularly Nicotine patches, of 2.1% (AYA, 2017) Explain factors that determine responsiveness to a price increase. Which of these factors might explain the difference in the economy and low income households?

A tax on Cigarettes introduced in Mexico in 2012 increased the price of Cigarettes by about 10%. An evaluation of the first two years of this measure found that Cigarette consumption fell on average by 7.6%, with a larger decrease (11.7%) in low income households. The study also estimated an increase in consumption of alternatives to smoking, particularly Nicotine patches, of 2.1% (AYA, 2017) Explain factors that determine responsiveness to a price increase. Which of these factors might explain the difference in the economy and low income households?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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