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Graph the following scenario using the Supply and Demand model. The market for cigarettes where the...

Graph the following scenario using the Supply and Demand model. The market for cigarettes where the government imposes a consumer tax, but also helps cigarette producers pay for their costs of production.

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Answer #1

The supply-demand model is one of the basic concepts of economics. The price level of a good is decided by the point at which quantity supplied equals quantity demanded.If the government imposes the consumer tax on cigarettes,the prices of cigarettes will increase and supply of cigarettes reduces.

But government helps cigarette producers pay for their costs of production by give them subsidiaries.The government provies supply sides subsidy so the producers of cigarettes will pay their costs of production.The supply side subsidy will increse the supply of cigarettes and prices of its will decrease.

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