What trade-offs must policy makers make

Reference no: EM132200203

Question: Please help in answering the question below:

In devising taxes, there is often a debate about (i) who bears the burden of the tax and

(ii) whether the tax achieves some desirable social goal, such as discouraging undesirable behavior by making it more expensive. In the case of cigarettes, smokers tend to be highly addicted and have lower income than the average nonsmoker. Taxes on cigarettes have historically had the effect of raising the price to consumers almost one for one with the size of the tax.

a) Why might such a tax be undesirable when considering issues of tax equity- that is, whether or not the tax burden falls more heavily on lower-income people? How do the price elasticities of supply and demand for cigarettes affect the equity of cigarette taxation?

b) How do the price elasticities of supply and demand for cigarettes affect the effectiveness of the tax in discouraging smoking?

c) In light of your answers to parts a. and b. and the historical response of price to the tax, what trade-offs must policy makers make when considering a cigarette tax?

Reference no: EM132200203

Questions Cloud

Discuss the three forms of equity in reward strategy : Discuss the three forms of equity in reward strategy and how they interrelate to each other. Which should be most important and why?

Write a short essay on the concept of the circular flow : Write a short essay on the concept of the circular flow and the measurement of Gross Domestic Product (GDP). As part of your answer, make sure that you outline.

What are the characteristics of each era : What are the three eras regarding the history of human population growth, and what are the characteristics of each era? According to Galor and Weil (2000).

Calculate the advertising elasticity : Linear elasticity function. Consider the demand function for product A, where PA is price of product A and PB is price of product B.

What trade-offs must policy makers make : In light of your answers to parts a. and b. and the historical response of price to the tax, what trade-offs must policy makers make when considering.

Journal entry to record declaration and payment of dividend : Net income after income taxes of $100 000 for Dec 31. income taxes paid were 25 000, Journal entry to record declaration and payment of dividend

Mobile application needed to support the sales : It is determined that a mobile application needed to support the Sales, Marketing and Finance departments will cost $60,000.

How effective would risk management : How effective would risk management be if you simply identified the risks and then walked away from them?

Create budget for the updates to be performed : Create a budget for the updates to be performed. Identify how much and on what the money will be spent include the lobby area, all four physician offices,

User Account

All Pages