Consider the market of cigarettes,using demand and supply analysis explain the effect on the price & quantity?
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01-25-2013, 10:21 PM
Post: #1
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Consider the market of cigarettes,using demand and supply analysis explain the effect on the price & quantity?
Consider the market of cigarettes, using demand and supply analysis (Include diagrams) explain the affect on the price and quantity consumed resulting from the following changes:
a)The government introduces a marketing campaign that highlights the serious health consequences of smoking. b)The government imposes an additional tax on tobacco Ads |
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01-25-2013, 10:29 PM
Post: #2
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a will be a demand side factor, government trying to reduce the social preference of cigarettes, that will shift demand to the left.
b will be both a supply and demand factor, tax will raise business cost, causing business to supply less cigarettes at a higher price, (a movement upward along the supply curve) it will as well lead to less demand as price have increased in response to the tax, (a movement downward along the demand curve) How much the tax get borne by producer or consumers depends on the relative elasticity of supply and demand. If it is the former more inelastic, it will be producer taking a greater share of the tax. Ads |
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