If the government increases the excise tax on cigarettes by 10%,which of the following statements is correct?
A)The government's tax revenue will fall since the demand for cigarettes is inelastic.
B)The quantity demanded of cigarettes will fall by more than 10% because the demand is inelastic.
C)Both the quantity demanded and supplied of cigarettes will fall by more than 10% because the demand is inelastic.
D)Since the demand for cigarettes is highly inelastic,the subsequent increase in price will be greater than the decrease in quantity demanded.

Question

Quizplus · Accepted Answer

The demand for cigarettes is highly inelastic, meaning consumers' quantity demanded doesn't change much with price changes. Therefore, when the government increases the excise tax, the price of cigarettes will increase significantly, but the decrease in quantity demanded will be relatively small. This is because consumers of cigarettes are less sensitive to price changes due to the addictive nature of the product.

If the Government Increases the Excise Tax on Cigarettes by 10%,which