Why would the combined measures be likely to have any impact

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Reference no: EM131899937

Problem

Use the model of consumer choice to answer the following question: Suppose there is a bill to tax cigarettes an additional $1 per pack, which is coupled with an income tax cut of $500 per person. If a person smokes an average of 500 packs per year, he/she would thus face a tax increase of $500 per year at the current level of cigarette consumption. The income tax cut would raise his/her after-tax income by $500. Would the combined measures be likely to have any impact on the person's consumption of cigarettes?

Reference no: EM131899937

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