The government in your country is considering three programs that affect the market for cigarettes. Program...

The government in your country is considering three programs that affect the market for cigarettes.

Program 1: Media campaigns and labeling requirements aimed at making the public aware of the dangers of cigarette smoking.

Program 2: A price-support program for tobacco farmers.

Program 3: A cap on the number of cases of cigarettes sold per quarter at 20,000 cases.

Determine the impact of the market for cigarettes if Program 1 is implemented.

Chose from answers below:

Decrease towards equilibrium a) Impact on demand_________________

Increase towards equilibrium b) impact on supply __________________

No impact c) Impact on price ____________________

Change in quantity uncertain d) Impact on quantity _________________

Quantity above equilibrium

Price above equilibrium

Price below equilibrium

Shift outwards / to right

Shift inwards / to left

Excess aupply

Change in price uncertain

Quantity below equilibrium

Excess demand

Solutions

Expert Solution

A - Impact on demand = Shift inward to left

B - Impact on supply = No impact

C - Impact on price = Price below equilibrium

D - Impact on quantity = Quantity below equilibrium

The program 1 was aimed at the reduction of demand. It was not a supply oriented program. Hence there will be no change in supply.

Rahul Sunny answered 2 years ago

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