Cigarette tax at the persons current level of consumption

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Reference no: EM13852051

Suppose there is a bill to increase tax on cigarettes by $1 per pack coupled with an income tax cut of $500. Suppose a person smokes an average of 500 packs of cigarettes per year--- and would thus face a tax increase of about $500 per year from the cigarette tax at the persons current level of consumption. The income tax measure would increase the persons after tax income by $500. Would the combined measures likely to have any effect on the person’s consumption of cigarettes? Why or why not?

Reference no: EM13852051

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