Question

The government in your country is considering three programs that affect the market for cigarettes. Program...

The government in your country is considering three programs that affect the market for cigarettes.

Program : A cap on the number of cases of cigarettes sold per quarter at 20,000 cases.

Determine the impact on the market if this program is implemented

(i) Impact on Demand?

(ii) Impact on Supply?

(iii) Impact on Price?

(iv) Impact on Quantity?

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Homework Answers

Answer #1

Demand will remain unimpacted, where as due to the rise in prices the quantity demanded will fall

The supply will also decrease as suppliers would have to compete even more to get a sale. This makes the ones who are able to sell better off than those are are unable to seek worse off.

Price will rise, due to the limited quantity supplied

Quantity will fall as it becomes more expensive and difficult to buy.

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