Question: Many governments around the world have implemented heavy taxes on cigarettes and other tobacco products in order to reduce the number of smokers. You are required to write an essay to critically evaluate the effectiveness of this policy. Make sure that you clearly address the following questions in your analysis:
1) Using the supply and demand model explain how a tax could reduce the sales of cigarettes.
2) Explain whether the demand for cigarettes is elastic or inelastic.
3) Compare the tax to alternative policies such as a price floor or education campaign.
4) Critically evaluate the effectiveness of the cigarette tax as a policy in reducing the number of smokers.