Suppose the price elasticities for cigarettes by habitual smokers and potential smokers are -0.25 and -4.0 respectively, in equilibrium. The government is considering implementing a new 10% tax on cigarettes.

a. For each type of consumer, calculate the expected reduction in consumption from the new tax. Explain why the responses of these two groups will differ, focusing on the determinants of elasticities.

b. From which group will the government raise more tax revenues? For each group, will tax revenue fall or rise relative to the original tax?