Question

In the short run the demand for cigarettes is totally inelastic. In the long run, suppose that it is perfectly elastic. What is the impact of a cigarette tax on t,he price that consumers pay in the short run and in the long run?

Answer 1

In the short run, the demand for cigarettes is totally inelastic, meaning that the price consumers pay will not change regardless of the tax imposed. In the long run, however, the demand for cigarettes is perfectly elastic, meaning that the price consumers pay will increase proportionally to the tax imposed.