Have attached the files. Will need the assignment at 7.45AM by tomorrow

Question

Komalavalli · Accepted Answer

Part a)
Cigarette Market:
Let us discuss about the cigarette market before the government intervention. Cigarette market was in equilibrium where demand equals supply of cigarette. This was illustrated in below diagram.
Equilibrium market of Cigarette:
From above graph we can see that supply of cigarette S is upward sloping curve, this indicates that the quantity supply of cigarette increases with increase in price level. Demand curve of cigarette D is downward sloping curve; this indicates that the quantity demand of cigarette decreases with increase in price level. At equilibrium point demand and supply of cigarette equals* is the equilibrium amount of cigarette supplies at equilibrium price level P*.Here we can see that the demand for cigarette is inelastic, because people will respond smaller for a large change in price level
Government intervention on cigarette market
i) Tax on Cigarette
Tax on cigarette will leads to decreases the quantity supply of cigarette in the nation. 
Tax on cigarette leads to shift supply curve from S to S+tax, price of cigarette increases from P to P1.At higher price level quantity of cigarette supplied in the market decreases from Q to Q1.Since the demand for cigarette is inelastic , tax burden were mostly on consumer and producer share less tax burden. From  above graph both shaded region indicates the government revenue.
ii) 
The public health campaigns is related to explaining about the health issues caused by the consumption of cigarette. 
Few people might respond to this health campaign, this will lead to decrease in demand for cigarette in the nation.

Have attached the files. Will need the assignment at 7.45AM by tomorrow

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment