### The Impact of Anti-Smoking Campaigns Funded by Cigarette Tax Revenue#### Graph Overview:The graph provided is a supply and demand chart illustrating the effect of an anti-smoking campaign on the cigarette market. The x-axis represents the quantity of cigarettes (Q), and the y-axis represents the price of cigarettes (P).- The initial demand curve (D1, blue line) shows the original demand for cigarettes before the anti-smoking campaign.- The new demand curve (D2, red line) represents the demand for cigarettes after the campaign.**Key Points:**- **P1 to P2:** The graph shows two price levels, P1 and P2. P1 is the initial price of cigarettes, while P2 is the increased price due to the new cigarette tax.- **Demand Shift:** The anti-smoking campaign is designed to reduce the demand for cigarettes. This is shown by the demand curve shifting from D1 to D2. #### Explanation:Consider the effect of the anti-smoking campaign funded by the proceeds from the cigarette tax. If the tax raises the price from P1 to P2 and the anti-smoking campaign is successful, the demand curve will shift from D1 to D2. This results in:- **Higher Prices (P1 to P2):** The increased tax on cigarettes leads to a higher price, moving from P1 to P2.- **Lower Demand (D1 to D2):** The aim of the anti-smoking campaign is to reduce cigarette consumption, thereby shifting the demand curve from D1 to D2, indicating a decrease in demand at any given price level.In summary, the combined effect of the tax increase and a successful anti-smoking campaign is expected to both raise the price of cigarettes (from P1 to P2) and reduce the quantity demanded (from D1 to D2). This dual approach helps to curb smoking by making cigarettes more expensive and less desirable through awareness and education efforts. **Understanding the Impact of Anti-Smoking Campaigns and Cigarette Taxes**The following question is designed to evaluate your understanding of the economic impact of anti-smoking campaigns funded by cigarette taxes. Consider the scenario where the tax raises the price of cigarettes from P1 to P2, and the anti-smoking campaign is successful. **Question:**Which of the following best describes the likely shift in the demand for cigarettes and its elasticity?- **Option 1:** The demand for cigarettes is likely to shift from D2 to D1, with the demand for cigarettes becoming more elastic.- **Option 2:** The demand for cigarettes is likely to shift from D1 to D2, with the demand for cigarettes becoming more elastic.- **Option 3:** None of the answers are correct.- **Option 4:** The demand for cigarettes is likely to shift from D2 to D1, with the demand for cigarettes becoming more inelastic.- **Option 5:** The demand for cigarettes is likely to shift from D1 to D2, with the demand for cigarettes becoming more inelastic.**Explanation:**- **Demand Shifts:** A successful anti-smoking campaign typically aims to reduce cigarette consumption, resulting in a leftward (or inward) shift in the demand curve for cigarettes (i.e., from D2 to D1).- **Elasticity of Demand:** Elasticity refers to the sensitivity of the quantity demanded to the change in price. With effective anti-smoking measures, consumers are more likely to reduce their consumption in response to price increases, thus making the demand more elastic.By analyzing the provided options, you can determine the correct answer based on these logical explanations of demand shift and changes in elasticity.

The demand curve for a commodity can be shifted as a result of change in taste and preference.…

Consider the effect of the anti-smoking campaign to be funded by proceeds of the cigarette tax. If the tax raises the price from P1 to P2 and the anti-smoking campaign is successful, The demand for cigarettes is likely to shift from D2 to D1 with demand for cigarettes becoming more elastic. The demand for cigarettes is likely to shift from D1 to D2 with demand for cigarettes becoming more elastic. None of the answers are correct. The demand for cigarettes is likely to shift from D2 to D1 with demand for cigarettes becoming more inelastic. The demand for cigarettes is likely to shift from D1 to D2 with demand for cigarettes becoming more inelastic.

Consider the effect of the anti-smoking campaign to be funded by proceeds of the cigarette tax. If the tax raises the price from P1 to P2 and the anti-smoking campaign is successful, The demand for cigarettes is likely to shift from D2 to D1 with demand for cigarettes becoming more elastic. The demand for cigarettes is likely to shift from D1 to D2 with demand for cigarettes becoming more elastic. None of the answers are correct. The demand for cigarettes is likely to shift from D2 to D1 with demand for cigarettes becoming more inelastic. The demand for cigarettes is likely to shift from D1 to D2 with demand for cigarettes becoming more inelastic.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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