Question

Are cigarettes relatively demand elastic or demand inelastic? Explain using the determinants of price elasticity of demand. Does the burden of cigarette taxes fall more heavily on buyers or sellers? Explain. Do you think that higher cigarette taxes will deter more people from smoking? (200 WORDS)

Answer 1

It can be mentioned that for smokers the demand elasticity for cigarettes is relatively inelastic in nature because it is a necessity for them and if the price of the cigarettes increased then the quantity demanded to decrease less proportionately than the price and as a result of which it can be mentioned that the tax is imposed on the cigarette then what happens is that because it is inelastic in nature the burden of the tax would be highly on the consumers because the producers are well aware of the fact that the demand is less elastic in nature as a result of which the burden would be shifted to the consumers and even then they would still pay for it. that is the reason why the tax burden would be on consumers of cigarettes then the producers and apart from that is there is a tax imposed on the cigarettes It wouldn't be possible for the smokers to reduce the habit of smoking completely because it is a necessity to them and they would be willing to pay higher amounts and as a result of this a better option than tax is setting the amount of production to a certain extent so that the consumption would be less in the society all in all