Graph the production possibilities curve. On a graph, plot the demand and supply curves and indicate equilibrium price and quantity. With the aid of a well-labeled graph, discuss the effects of this policy. Using demand and supply curves, discuss the effects of the following events on the equilibrium price and quantity of cigarettes. A fertilizer that increases the yield per acre of tobacco is discovered.
More people quit smoking for health reasons.
The tax per pack of cigarettes is raised to finance universal health coverage. The U.S. removes the embargo on the importation of Cuban tobacco products. American goods suddenly become more popular in Germany. Inflation rates in the U.S. accelerate, while they remain low in France. The U.S. enjoys an economic boom, while Japan falls into a recession.