Comments on: A question on cigarette taxes

By: kevin persick

kevin persick — Wed, 13 May 2009 03:27:24 +0000

In chapter 8 we discussed the inefficiency of tax and I learned that the demand for cigarettes will not change when a tax is imposed on it. The 3rd law of demand states the reducing the price of higher quality relative to lower quality versions of the same good.I believe this means people will buy to the demand of there life’s.

By: Jimmy Steward

Jimmy Steward — Mon, 04 May 2009 21:09:11 +0000

When a good is taxed the majority of the tax is payed by the consumer. The goverment can tax the seller and the sellers tax the consumers.

According to Alchian and Allen Theorm The 3rd law of demand states that by reducing the price of higher quality relative to lower quality versions of the same good, a fixed transportation charge will trigger a predictable shift in the mix of quality grades purchased by consumers in distant markets, as compared to the mix purchased locally. This means that if higher grade cigarettes were cheaper people would buy them, but since they are not people buy chaeper ones that are similar to the name brands they are use to.

By: Korey LeBlanc

Korey LeBlanc — Fri, 01 May 2009 05:32:52 +0000

At the beginning of chapter 8 we talked about how we could measure the inefficiency of tax. We learned that a tax creates a deadweight loss and this is called an excess burden of the tax. A tax imposed on the good will not change the demand that the smokers will have for the good. The 3rd law of demand holds that a fixed cost added to a good of varying quality causes the consumer to prefer the higher quality rather than the lower. At the rate of tax on cigarettes, it doesnt matter what name brand they buy. Consumers will continue to buy it even if the cigarette is a lower grade.

By: Antoinette Link

Antoinette Link — Fri, 01 May 2009 00:07:58 +0000

The tax imposed on the good will not change the demand that the smokers will have for the good. If the price of the good increases the purchasing of the product will decrease.Which will leave a paying the majority of the taxes to either the buyers or the sellers.

By: morris.coats

morris.coats — Thu, 30 Apr 2009 04:52:03 +0000

Jimmy,

You are so close to getting these big extra points. Close, but just now yet. I will give you another hint: When a good is taxed, how much of the tax do the buyers pay? the sellers? Another hint: the answer has nothing to do with deadweight loss. Oh, Wolfgang and Jimmy, when the price of cigarettes increases, people still reduce their purchases, but the third law says they will shift toward quality. Hmmmm?

-MC

By: Wolfgang Mendez

Wolfgang Mendez — Thu, 30 Apr 2009 04:25:45 +0000

In the material discussed at the beginning of chapter 8 we talked about how we could measure the inefficiency of tax. We learned that a tax creates a deadweight loss and this is called an excess burden of the tax. The burden of a tax exceeds the tax revenue that is received by the government. This is why the statement is counter to the theory viewed in the first part of chapter 8.
The result is surprising because of the theorem of the 3rd law of demand, which state that any value added as a fixed cost to goods with differences in qualities would cause the purchase of the product of higher quality. In this case, if the price rises consumers will still buy the product without a doubt.

By: Norris Vessell

Norris Vessell — Wed, 29 Apr 2009 18:37:41 +0000

my comment has not so much to do with the question asked, but simply just me commenting on the above topic, i believed that it was in March that Pres. Obama sign the bill to increase tax on cigarettes from 0.39 to 1.01 per pack as well as cigars to pipes.Chewing tobacco from 19.5 to 50 cents a pound. The total expected to be raised over the 4 1/2 year-long health insurance expansion is nearly $33 billion. it is estimated that over 440,000 premature deaths are a result from smoking,which costs the economy over 190 billion dollars. the tax is a terrific health move, about one in five adults in the us smoke cigarettes, with a tax increase we should see that percentage dwindle.

By: Jimmy Steward

Jimmy Steward — Wed, 29 Apr 2009 02:54:34 +0000

In chapter 8 we saw the excess burden. The excess burden is the amount by which the burden of a tax exceeds the tax revenue received by the government- the deadweight loss from a tax. It is counter to the theory in ch. 8 because it is flipped. Every 1 cent increase the price in the state goes up. In ch. 8 we learned that the excess burden exceeds the tax revenue.

The 3rd law of demand holds that a fixed cost added to a good of varying quality causes the consumer to prefer the higher quality rather than the lower. Most people stick to name brand cigarettes. If the price rises they will not care because consumers stick to brandnames. People will purchase what satisfys his or her wants