In the three months before a $1 per pack cigarette tax took effect in Alaska, smokers bought 175 million more cigarettes than during the same period a year earlier. What explains this behavior by consumers?
The increase of $1 per pack is pretty significant given the price of cigarettes. Many smokers may have decided that the best way to save money would be to stockpile cigarettes before the expected tax increase took effect. So an expectation of a price increase in the near future caused the current demand curve for cigarettes to shift to the right (an increase in demand).
You might also like to view...
Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ________
A) the economy remains at full employment B) structural unemployment increases C) there is a shortage of workers in both sectors D) cyclical unemployment increases
The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. Using the figure, how much tax revenue does the government raise?
A) $20,000 B) $40,000 C) $60,000 D) $80,000