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

When the elasticity of demand is higher (elastic), consumers are more responsive to price changes. A tax increases the price, leading to a larger decrease in quantity demanded when demand is elastic.

Suppose the Government Wants to Discourage the Use of Cigarettes