Different economic studies estimate the price elasticity of demand for certain goods, some of which are reported on page 176 of the Hubbard/O’Brien textbook. The following table presents select elasticity of demand estimates from those reported:

Product Estimated Elasticity

Barnes & Noble

books- 4.00

Coca-Cola- 1.22

Cigarettes- 0.25

Beer- 0.23

Gasoline- 0.06

research tax rates imposed on cigarettes for the state in which you reside and two surrounding states. Discuss the changes in tax rates on cigarettes in those states over the last few years. Predict the implication of this tax rate change on tax revenue according to theory.

Research the effect of changes in cigarette taxes on tax revenue for a state. Does this change indicate cigarettes have an elastic or inelastic demand in that state?