Suppose the government wants to discourage the use of cigarettes. If it imposes a tax on cigarettes, the equilibrium quantity falls the most when the elasticity of demand equals

Question

Quizplus · Accepted Answer

The equilibrium quantity falls the most when the elasticity of demand is highest (in this case, 2.00), because consumers are more responsive to price changes, leading to a larger decrease in quantity demanded when the price increases due to the tax.

Suppose the Government Wants to Discourage the Use of Cigarettes