Suppose there is a bill to increase the tax on cigarettes by $1 per pack coupled with an income tax cut of $500. Suppose a person smokes an average of 500 packs of cigarettes per year—and would thus face a tax increase of about $500 per year from the cigarette tax at the person’s current level of consumption. The income tax measure would increase the person’s after-tax income by $500.

Would the combined measures be likely to have any effect on the person’s consumption of cigarettes? Why or why not?

According to studies undertaken by the Department of Agriculture, the price elasticity of demand for cigarettes is approximately -0.3 and the income elasticity is approximately 0.5.

a. What effect would a 10% increase in the price of cigarettes due to increased cigarette taxes have on cigarette consumption and consumer spending on cigarettes?

b. If consumer incomes are expected to double over the next decade, what impact would this have on cigarette sales?

6.According to studies undertaken by the Department of Agriculture, the price elasticity of demand for cigarettes is approximately -0.3 and the income elasticity is approximately 0.5.

a. What effect would a 10% increase in the price of cigarettes due to increased cigarette taxes have on cigarette consumption and consumer spending on cigarettes?

b. If consumer incomes are expected to double over the next decade, what impact would this have on cigarette sales?

6.According to studies undertaken by the Department of Agriculture, the price elasticity of demand for cigarettes is approximately -0.3 and the income elasticity is approximately 0.5.

a. What effect would a 10% increase in the price of cigarettes due to increased cigarette taxes have on cigarette consumption and consumer spending on cigarettes?

b. If consumer incomes are expected to double over the next decade, what impact would this have on cigarette sales?