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Suppose a friend of yours is wondering why government hasn't imposed a tax on cigarettes to discourage consumption of cigarettes because in her
Suppose a friend of yours is wondering why government hasn't imposed a tax on cigarettes to
discourage consumption of cigarettes because in her estimation imposing a tax on cigarettes
would have the effect of increasing the price of cigarettes and therefore discourage smoking of
cigarettes. Briefly explain to her using the concept of elasticity why a government tax on
cigarettes would be ineffective in reducing consumption of cigarettes but rather will give
government more revenue.