Final answer:
The question examines the effect of a local government tax on cider producers in Raleigh, resulting in a decrease in sales from 10 billion to 4 billion cases and an increase in price from $11 to $13. It relates to the broader economic concept of 'sin taxes' and their impact on consumer behavior and market equilibrium, similar to historical data on government taxes on cigarettes.
Step-by-step explanation:
The question presented refers to the consequences of a tax imposed on cider producers by the local government of Raleigh. Initially, 10 billion cases of cider were sold annually at $11 each. After the tax on cider producers was instituted, sales dropped to 4 billion cases per year, with consumers paying $13 per case and producers getting $6 after tax. This scenario closely parallels the concept of a "sin tax" applied to cigarettes and other goods deemed harmful, such as alcohol.
Government taxes can substantially affect both consumer behavior and producer profits. The pivotal element is the extent to which demand declines as a result of the tax, which is known as the price elasticity of demand. This example can lead to discussions about tax incidence, consumer and producer surplus, and market equilibrium changes.
Historical data on cigarette taxes provide a relevant example. When the federal tax on cigarettes was proposed to increase, the key consideration centered on how cigarette consumption would adjust. Similarly, for cider producers in Raleigh, analyzing the decrease in sales post-tax can offer insights into the elasticity of demand for their product.