Assume the elasticity of supply of cigarettes

Assignment Help Business Economics

Reference no: EM13733311

The elasticity of demand for cigarettes is estimated to be about - 0.5. Assume the elasticity of supply of cigarettes is 1

a. If the government places a tax of $0.60 on cigarettes, how much will the price of cigarette increase (approximately)?

b. Assume the price of cigarettes was $40 before the price increase. What will happen to the quantity of cigarettes demanded after the tax is implemented?

Reference no: EM13733311

Questions Cloud

Mechanisms and accomplishment inherent in an ideal system : “If health care in the United States is going to be better, fairer, and more cost effective, it will require leaders to step up to the challenge of change” Explain how the Triple Aim contributes toward realizing the vision of better health in the Uni..

Capita income and capital per worker in solow growth model : How do you calculate per capita income and capital per worker in the Solow Growth Model?

Sale of human organs is legalized and a free market develops : Assume the sale of human organs is legalized and a free market develops. Furthermore, assume the market is in equilibrium. Trace through the price and output effects of the following: An increase in the incomes of potential buyers of human kidneys. A..

Health care and economics : In the country of Drazah Larom (moral hazard spelled backward), health insurance is nonexistent and all medical markets are perfectly competitive. Use supply and demand analysis to explain the impact of the following changes on the price and output o..

Assume the elasticity of supply of cigarettes : The elasticity of demand for cigarettes is estimated to be about - 0.5. Assume the elasticity of supply of cigarettes is 1. If the government places a tax of $0.60 on cigarettes, how much will the price of cigarette increase (approximately)?

Statements relate to the AD–AS model : Describe how the following statements relate to the AD–AS model:

Find the amount of consumer surplus and producer surplus : Suppose you have the following demand and supply schedules: Qd = 900-10p+2Y and Qs= -50+25P where Qd and Qs are quantity demanded and supplied, respectively, Y is average income (in 1000s) in the area and P is the price of the good. Suppose Y=50. Fin..

Extensive financial and commercial networks linking nations : What are some of the main advantages and disadvantages of the extensive financial and commercial networks linking nations today?

About the potential benefits and costs of diversification : Economists argue about the potential benefits and costs of diversification. For instance, while diversification can certainly help company to promote new products, at the same time through the merger of two firms it can be more expensive to develop c..

User Account

All Pages