Short Answer

Comparing Tax Outcomes

A city government imposes an identical 20% tax on two different goods: cigarettes and a specific brand of luxury chocolate bars. After one year, they observe that the quantity of cigarettes sold has decreased by only 5%, while the quantity of the luxury chocolate bars sold has decreased by 30%. Using your understanding of how consumer purchasing behavior responds to price changes, explain the economic reason for this significant difference in outcomes.

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Updated 2025-09-16

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