Balbonia’s Vice Tax Welcome! You are encouraged to register with the site and login (for free). When you register, you support the site and your question history is saved.A "vice tax" can suppress demand for a product or service that is not wholly in the public's favor by making it more expensive. The country of Balbonia wished to duplicate Geraldia's success in using a vice tax to reduce the sales of nicotine products, such as cigarettes. When Balbonia introduced the same tax into its market, however, demand for nicotine products remained undiminished, even though the currency-adjusted prices of nicotine in Balbonia rose to levels equivalent to those in Geraldia. Which of the following, if true, most helps to explain the contrasting impact of the two instances of vice tax described above? Balbonia has a much greater variety of nicotine products and makers of those products than does Geraldia, including electronic cigarettes. It required a different tax rate and tax structure in Balbonia to achieve the same effective nicotine product prices as were present in Geraldia. Geraldia has laws restraining the marketers of nicotine products from increased advertising of their products, while Balbonia does not. Smokers of cigarettes in Balbonia have more of an ingrained habit of smoking after dinner than do smokers in Geraldia. Vice taxes were far more prevalent in Balbonia than in Geraldia even prior to the introduction of the nicotine vice tax in Balbonia. Review Answer