Question

Studies have shown that states with higher cigarette taxes have lower rates of teenage smoking. But subsequent studies that excluded the states of North Carolina, Kentucky, and Virginia found no significant relationship between the tax on cigarettes and the incidence of teenage smoking. Can you think of a plausible explanation? Why is there no significant difference in the incidence of teenage smoking between high-tax and low-tax states when North Carolina, Kentucky, and Virginia are excluded from the study? Please explain.

Answer 1

Answer - If the results did not show any kind of relation when these three states were excluded , this means that three states were the major source influencing the relationship. It means that , the introduction of taxes on cigarettes led to the large decrease in the teenagers smoking cigarette in these three states meaning that demand for cigarattes were highly elastic in these states. When these were exluced , no trend was seen means the demand might be inelastic there to show no trends.