Article Discussion Assignment

Each year in Fin 6025, I assign an "Article Discussion Assignment." Roughly speaking, the idea is this: Groups of MBA students have to identify a news article that relates in some way to material from class. Then the group has 200 words to explain how the article relates to class. The articles and discussions are then read by me and by other students.

I like this assignment because I always learn something when reading the articles and discussions.

So I thought I'd summarize some of the articles (and the economics underlying) here.

From a group of PMBA students, I got this one:

Health Groups Pushing for Tax Hike on Cigarettes

The plan is to raise Utah's cigarette taxes from 69.5 cents per pack to $2. That's a big increase!

One notable feature of cigarette demand is that it's somewhat inelastic. This means two things. First, the deadweight loss associated with this tax is likely to be small. Second, the cigarette tax is paid mostly by consumers. Because the poor are disproportionately likely to smoke, we might worry about the distributional implications of this tax.

Compare to the tax on gasoline, as we discussed in class. There, supply is inelastic, so again we have small deadweight losses but the tax burden falls primarily on the suppliers.