1. The city of Jacksonville just raised the local option gas tax by $.06 per gallon. Use supply and demand as a basis to explain why it is unreasonable to expect that consumers will pay the full $.06 increase in this tax.

2. It has been argued (correctly) that the price elasticity of demand for smokers is inelastic. Given this, the tobacco industry argued for years that placing much higher taxes on cigarettes was just a ploy to raise tax money and not to reduce smoking as was argued by tax supporters. Explain why this argument by the tobacco industry fails when the factors of time and sub-groups of smokers are factored in.