Suppose that the government has a goal to reduce the demand for cigarettes in support of a health program. Given this, the government decided to impose a per-unit tax of 40 centavos per pack that is levied on the sellers or placed on the sale of cigarettes by the government. This causes a shift of the market supply of cigarettes from S to S' as shown. Price ($ per pack) D₁ 1.50 1.40 1.30 1.15 D₂ Quantity (Millions of pack) 4 5 Answer the following questions regarding this case. | 1. Is demand and supply for cigarettes elastic, unitary elastic or inelastic? (2 points) Explain your answer. (3 points) 2. Determine burden of the tax that falls on consumers and on producers. (4 points) Who bears most of the burden of the tax? (2 points) 1.25
Suppose that the government has a goal to reduce the demand for cigarettes in support of a health program. Given this, the government decided to impose a per-unit tax of 40 centavos per pack that is levied on the sellers or placed on the sale of cigarettes by the government. This causes a shift of the market supply of cigarettes from S to S' as shown. Price ($ per pack) D₁ 1.50 1.40 1.30 1.15 D₂ Quantity (Millions of pack) 4 5 Answer the following questions regarding this case. | 1. Is demand and supply for cigarettes elastic, unitary elastic or inelastic? (2 points) Explain your answer. (3 points) 2. Determine burden of the tax that falls on consumers and on producers. (4 points) Who bears most of the burden of the tax? (2 points) 1.25
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 10PA
Related questions
Question
![Suppose that the government has a goal to reduce the demand for
cigarettes in support of a health program. Given this, the government
decided to impose a per-unit tax of 40 centavos per pack that is levied
on the sellers or placed on the sale of cigarettes by the government. This
causes a shift of the market supply of cigarettes from S to S' as shown.
Price
($ per pack)
1.50
1.40
1.30
1.15
D₁
D₂
Quantity
(Millions of pack)
3
4
5
Answer the following questions regarding this case.
se.l
1. Is demand and supply for cigarettes elastic, unitary elastic or
inelastic? (2 points) Explain your answer. (3 points)
2. Determine burden of the tax that falls on consumers and on
producers. (4 points) Who bears most of the burden of the tax? (2
points)
1.25](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0504dcc3-0297-4616-97e1-fa6605081d0b%2F9609d879-9ea3-46a9-9268-0bbe229213b6%2Fzyz1bv_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose that the government has a goal to reduce the demand for
cigarettes in support of a health program. Given this, the government
decided to impose a per-unit tax of 40 centavos per pack that is levied
on the sellers or placed on the sale of cigarettes by the government. This
causes a shift of the market supply of cigarettes from S to S' as shown.
Price
($ per pack)
1.50
1.40
1.30
1.15
D₁
D₂
Quantity
(Millions of pack)
3
4
5
Answer the following questions regarding this case.
se.l
1. Is demand and supply for cigarettes elastic, unitary elastic or
inelastic? (2 points) Explain your answer. (3 points)
2. Determine burden of the tax that falls on consumers and on
producers. (4 points) Who bears most of the burden of the tax? (2
points)
1.25
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