Consider the following market supply and demand information for cigarettes: Price ($) Demand for Cigarettes (in million packs per week) $2 12 3 10 4 8 5 6 6 4 7 2 and the supply is 8,000,000 cigarette packs per week. 1. Plot the demand and supply curves and label them carefully. What are the equilibrium price and equilibrium quantity of cigarettes bought and sold? 2. Now suppose that the government mandates a $1 excise tax per pack on the buyers of cigarettes. Show how the diagram changes after the tax is imposed. Draw the new curve. What is the price of cigarettes that consumers pay with the tax? What is the price that producers receive? What is the new equilibrium quantity bought and sold?
Consider the following market
Price ($) Demand for Cigarettes (in million packs per week)
$2 12
3 10
4 8
5 6
6 4
7 2
and the supply is 8,000,000 cigarette packs per week.
1. Plot the demand and supply curves and label them carefully. What are the
2. Now suppose that the government mandates a $1 excise tax per pack on the buyers of cigarettes. Show how the diagram changes after the tax is imposed. Draw the new curve. What is the price of cigarettes that consumers pay with the tax? What is the price that producers receive? What is the new equilibrium quantity bought and sold?
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