How it works (Ad valorem Tax) ​

    Cards (3)

    • A tax on cigarettes will reduce consumption by raising its price and therefore reducing demand.
    • An ad valorem tax has caused an increase in price therefore consumers will be able to buy less with the same amount of income
    • An ad valorem tax effects low income consumers who are addicted to cigarettes massively as they may sacrifice necessities so they can afford the same amount of cigarettes at a higher price