New Brunswick Government to Boost Taxes on Tobacco

The New Brunswick tax on cigarettes will jump to $6.25 for a 25-cigarette packwithout HST. A regular pack of cigarettes now costs up to $13. Jeff Elliott, a seller of cigarettes and a smoker said, "I enjoy smoking so I'll pay whatever the difference is I guess." Smokers told CBC that they were unlikely to quit despite taxes going up.

Source: CBC News, February 1, 2017

a.How will the New Brunswick market for cigarettes respond to the tax increase?

b.What do the statements about smokers' responses to the cigarette tax imply about the elasticity of demand for cigarettes?

c.Why does a rise in the cigarette tax bring an increase in tax revenue?