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12: Cigarettes (Taxes/Deadweight Loss) - In an effort to curb the use of cigarettes, the US has utilized taxes to inhibit the purchase of
12: Cigarettes (Taxes/Deadweight Loss) - In an effort to curb the use of cigarettes, the US has utilized taxes to inhibit the purchase of them to help the populations health. The price for cigarettes without a tax would be $2.50/pack. In that market, 950M cigarette packs would be the quantity sold each year. The government has inserted $2.00 tax/pack of cigarette. This tax reduces the amount of quantity demand to 600M cigarettes and the $2 tax is burdened 25% by the producer and 75% by the consumer.
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