What about the second and subsequent years

Reference no: EM131205486

By the numbers. Suppose that the legislature was considering an increase in the tax on cigarettes of 50 cents a pack. The current price of a pack of cigarettes is about $3.00, and sales in your state are two million packs a year. The estimated short run elasticity of demand for cigarettes at the current price and quantity is .4. The long-run elasticity of demand (a year or longer) is .75. How much additional revenue can you expect in the first year, ignoring any growth in population of smokers? By how much will smoking be reduced? What about the second and subsequent years?

Reference no: EM131205486

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