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    This is the question:

    Examine the importance of the elasticity of demand in a government decision to impose a specific tax on the buyer of cigarettes.

    Is it asking me to list reasons for and against the importance of the elastcity of demand being an important role in the governments decision to impose a tax on tobacco users? and also alternative reasons like the government using the tax just to get easy money etc..

    I'm just not sure if i'm interpreting this right...

    plz help!
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    (Original post by jbyrne1989)
    This is the question:

    Examine the importance of the elasticity of demand in a government decision to impose a specific tax on the buyer of cigarettes.

    Is it asking me to list reasons for and against the importance of the elastcity of demand being an important role in the governments decision to impose a tax on tobacco users? and also alternative reasons like the government using the tax just to get easy money etc..

    I'm just not sure if i'm interpreting this right...

    plz help!
    Looks like an Economics question to me.
    Basically what it wants is how to determine how much extra cost the average smoker will bear before changing their habits (i.e. demand drops significantly). Remember addictive goods - especially those without ready substitutes - are usually inelastic. Users are less responsive to price increases due to the pleasure they derive from the good.

    See if that helps.
 
 
 
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