To Demonstrate: Diagrammatically the situation when it is economically feasible to smuggle a pack of cigarettes from South Texarkana to North Texarkana Diagrammatically the situation when it is not economically feasible to smuggle a pack of cigarettes from South Texarkana to North Texarkana. Demonstrate the situation where the demand for cigarettes is perfectly inelastic and all the smokers in North Texarkana are smuggling at a cost of $1.85 per pack. How the high cost of smuggling will go away until a North Texarkanan no longer finds it profitable to smuggle. Explain the diagram. The demand for cigarettes is perfectly inelastic. Is there is any inefficiency when smokers of North Texarkana are smuggling cigarettes at a cost of $1.85 per pack and are not paying any tax. What is the amount of inefficiency per pack? If smuggling is impossible, even then if there is any inefficiency and ascertain its amount. Concept Introduction: Inelastic Demand : When the quantity demanded is unresponsive to the change in price , the demand is said to be inelastic.

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Chapter 7, Problem 4P

To determine

To Demonstrate:

Diagrammatically the situation when it is economically feasible to smuggle a pack of cigarettes from South Texarkana to North Texarkana

Diagrammatically the situation when it is not economically feasible to smuggle a pack of cigarettes from South Texarkana to North Texarkana.

Demonstrate the situation where the demand for cigarettes is perfectly inelastic and all the smokers in North Texarkana are smuggling at a cost of $1.85 per pack. How the high cost of smuggling will go away until a North Texarkanan no longer finds it profitable to smuggle. Explain the diagram.

The demand for cigarettes is perfectly inelastic. Is there is any inefficiency when smokers of North Texarkana are smuggling cigarettes at a cost of $1.85 per pack and are not paying any tax. What is the amount of inefficiency per pack? If smuggling is impossible, even then if there is any inefficiency and ascertain its amount.

Concept Introduction:

Inelastic Demand:

When the quantity demanded is unresponsive to the change in price, the demand is said to be inelastic.

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