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  • ECON 1580 Discussion Assignment Unit 3

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    A person who smokes an average of 1.4 packs of cigarettes per day, or 500 packs per year, is considered a heavy smoker. For such a heavy smoker, an income tax cut would increase their after-tax income and likely lead them to purchase more cigarettes. Similarly, a cigarette tax increase would raise the cost of cigarettes but may not significantly impact their cigarette consumption. The tax cut and tax increase could balance each other out and ultimately have no effect on a heavy smoker's cigarette usage.

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    A person who smokes an average of 1.4 packs of cigarettes per day, or 500 packs per year, is considered a heavy smoker. For such a heavy smoker, an income tax cut would increase their after-tax income and likely lead them to purchase more cigarettes. Similarly, a cigarette tax increase would raise the cost of cigarettes but may not significantly impact their cigarette consumption. The tax cut and tax increase could balance each other out and ultimately have no effect on a heavy smoker's cigarette usage.

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    8 views1 page

    ECON 1580 Discussion Assignment Unit 3

    Uploaded by

    Tesfahun
    A person who smokes an average of 1.4 packs of cigarettes per day, or 500 packs per year, is considered a heavy smoker. For such a heavy smoker, an income tax cut would increase their after-tax income and likely lead them to purchase more cigarettes. Similarly, a cigarette tax increase would raise the cost of cigarettes but may not significantly impact their cigarette consumption. The tax cut and tax increase could balance each other out and ultimately have no effect on a heavy smoker's cigarette usage.

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    of 1

    N.

    B
    A person who smokes an average of 500 packs of cigarettes a year is termed a heavy smoker
    since he or she smokes an average of 1.4 packs of cigarettes every day. (DeVita Jr, n.d.).

    NO it has no effect because In the situation we've been provided, the income tax cut will
    undoubtedly raise after-tax income, and given that we're dealing with a heavy smoker,
    demand for cigarettes will rise as well. On the other side, the increase in cigarette taxes will
    raise the cost of purchasing cigarettes. This heavy smoker is unlikely to stop his or her
    cigarette habit, especially when the increase in cigarette prices changes nearly nothing due to
    the tax revenue cut incentive. If he or she smokes 500 packs of cigarettes per year, a $1 rise
    in the price of cigarettes per pack will cost him or her $500 per year. In other words, neither
    of these two elements will raise or decrease a person's desire for cigarettes.
    Cigarette price increases and income tax cuts tend to balance each other out. For example,
    suppose a person earned $4500 before the tax cut and the price of cigarettes increased. We
    also assume that before anything changed, a pack of smokes cost $1. Because this person
    used to smoke 500 packs of cigarettes every year, he or she spent $500 per year and earned
    $4000. Cause number one, after the smokes increase by another $1, his or her spending
    doubles to $1000, but when we include the second factor, the $500 tax cut, his or her income
    increases by $500 from $4500 to $5000. When you reduce $1000 from the $5000, the income
    is back to $4000 as before. So, in this scenario, the combined measures have no effect on a
    person's decision to change his or her cigarette smoking.
    Reference
    Dr. DeVita Jr. V. T. (n.d.). How do I know if I’m a light, average, or heavy smoker?
    Sharecare.com. https://www.sharecare.com/health/quit-smoking/how-do-i-know-if-im-

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