Question: Consider public policy aimed at smoking a Studies indicate tha

Consider public policy aimed at smoking.
a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price?
b. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now?
c. Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?

View Solution:

Sale on SolutionInn
  • CreatedDecember 14, 2012
  • Files Included
Post your question