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suppose that the government wants to reduce cigarette smoking. it decides it will impose a $3...

suppose that the government wants to reduce cigarette smoking. it decides it will impose a $3 per pack of cigarette tax. this tax will be ineffective because heavy smokers have demand curves that are:

A. Relatively inelastic
B. Relatively Elastic
C. Perfectly Elastic
D. what's a demand curve

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Answer #1

The tax will be ineffective on the heavy smokers of cigarettes because the demand curve of heavy smokers is (A) relatively inelastic.

Their demand curve is inelastic because cigarette smoking is their habit and it's is like a necessity to them. Demand curves of things that are habitual and necessary, is inelastic demand curve. That is, it's demand is not affected by the price. Whether the price increase , it's demand remains unaffected. Demand curve of things like.l medicines is also inelastic as it is a necessity.

On the other hand, elastic demand curve is of commodities whose demand is affected by the price like luxury commodities. It could be perfectly elastic that is, demand and price changes in same ratio, or relatively elastic which means price and demand changes in different ratios.

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