Suppose the government decides to enact a new tax on electronic cigarettes. What will happen in the market for electronic cigarettes? (Note: Neither the supply curve nor the demand curve for electronic cigarettes is perfectly inelastic.) Choose one or more: A. The tax on electronic cigarettes will cause a deadweight loss. B. The price consumers pay for electronic cigarettes will be higher. C. The price producers receive for electronic cigarettes will be higher. D. The quantity of electronic cigarettes sold will decrease.

Question

Jadyn Suarez

Business

6 January, 22:20

Suppose the government decides to enact a new tax on electronic cigarettes. What will happen in the market for electronic cigarettes? (Note: Neither the supply curve nor the demand curve for electronic cigarettes is perfectly inelastic.) Choose one or more: A. The tax on electronic cigarettes will cause a deadweight loss. B. The price consumers pay for electronic cigarettes will be higher. C. The price producers receive for electronic cigarettes will be higher. D. The quantity of electronic cigarettes sold will decrease.

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Answers (1)

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Anthony Olson · Answer 1

A, B, C, and D

Explanation:

Since electronic cigarette is not inelastic, a tax increase on it will result in an increase in the price of electronic cigarettes which will bring about a decrease in the quantity sold. Producers will include the tax in the product thus increasing the price they receive for electronic cigarettes thus forcing consumers to pay a higher price. There will be a dead weight loss on the side of the consumer as they will have to pay for the increased tax