Question

The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on cigarettes went into effect, the demand for home cigarette rolling machines most likely:_________

Answer 1

Answer:

Explanation:

The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on cigarettes went into effect, the demand for home cigarette rolling machines most likely increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to rise.

Answer 2

Answer:

The demand for home cigarette rolling macines will most likely increase

Explanation:

First, the imposition of substanal taxes on cigarettes means that the cost of consuming a cigarette will increase substantially as well. This means the consumers of cigarette will begin to look for cheaper alternatives to buying already manufactured cigarettes

The most obvious alternative is to get a home cigarette rolling machine and since the demands for the home cigarettes will go up it means the price of the cigarette rolling machines will also rise. Furthermore, the quantity of the machines purchased will rise as well.

The reason for this reaction is that Tobacco and Cigarette roling machines are complementary goods, while The Cigarette rolling machines and cigarettes are substitute goods. As the price of the cigarettes go up, the demand for cigarette rolling machines increase, due to the low cost of getting loose tobacco.