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6. Introduction to Taxes and Subsidies
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Problem 4
Problem 5
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Problem 12
6. Introduction to Taxes and Subsidies
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6. Introduction to Taxes and Subsidies / Elasticity and Taxes / Problem 5
Problem 5
Why might a tax on cigarettes result in a higher tax burden on consumers?
A
Cigarettes have perfectly elastic demand, so producers bear the entire tax burden.
B
Cigarettes have perfectly inelastic supply, so producers bear the entire tax burden.
C
Cigarettes have elastic demand, so consumers are more responsive to price changes.
D
Cigarettes have inelastic demand due to addiction, so consumers are less responsive to price changes.
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