rdg 15 says tobacco gets taxed b/c it is an INelastic demand good…is that it? am i missing anything? buyer takes on the tax burden b/c the tobacco marlet is inelastic demand thanks
yes, consumers will bear a higher burden if demand is less elastic. notice: higher burden, not the whole tax
daj224 Wrote: ------------------------------------------------------- > rdg 15 says tobacco gets taxed b/c it is an > INelastic demand good…is that it? am i missing > anything? > > buyer takes on the tax burden b/c the tobacco > marlet is inelastic demand > > thanks If demand is elastic for a good, and there is a tax, the seller will have to take part of the burden. If demand is inelastic, you’re still going to consume it if there is a price increase. Seller will raise the price to offset the tax and not lose any revenue because people will still consume.
> If demand is inelastic, you’re still going to > consume it if there is a price increase. Seller > will raise the price to offset the tax and not > lose any revenue because people will still > consume. i got it, seller passes on price increase to the drug addict? I wish they had more stuff on drug cartels.
daj224 Wrote: ------------------------------------------------------- > > If demand is inelastic, you’re still going to > > consume it if there is a price increase. > Seller > > will raise the price to offset the tax and not > > lose any revenue because people will still > > consume. > > > i got it, seller passes on price increase to the > drug addict? I wish they had more stuff on drug > cartels. Exactly. If the tax is 15 cents per pack, the seller will charge me 15 cents more per smoke. If my demand is inelastic, i’ll still consume and pay the higher fee. Of course, there is a limit as elasticity changes at different prices.
I really need to quit smoking (again). I’m going to quit June 8th… don’t need to mess with my brain chemistry before this exam. Yes, tobacco is almost completely inelastic… I’ll give an example… a few years ago I did a study abroad to London for a year. I financed it with my GI Bill, savings, and some debt (all in US$). At the time, the US$ was worth about 55-60 pence, and a pack of Marlboro Lights in London cost ~5 pounds. And I STILL smoked!! Even though it was costing me almost $10 a pack! Talk about capturing my consumer surplus! If you don’t smoke, stay away, those things are evil and nasty!
> > Yes, tobacco is almost completely inelastic… > > I’ll give an example… a few years ago I did a > study abroad to London for a year. I financed it > with my GI Bill, savings, and some debt (all in > US$). At the time, the US$ was worth about 55-60 > pence, and a pack of Marlboro Lights in London > cost ~5 pounds. And I STILL smoked!! Even though > it was costing me almost $10 a pack! Talk about > capturing my consumer surplus! > > when i lived in NY i quit after bloomberg raised prices, guess i was the black swan. its funny, because volume II book actually talks about the Bloomberg case!!! I can relate to that