Question: need this solved with work explained 4. Suppose that California's Department of Public Health's goal is to impose a tax that will reduce the consumption

need this solved with work explained

need this solved with work explained 4. Suppose that California's Department of

4. Suppose that California's Department of Public Health's goal is to impose a tax that will reduce the consumption of cigarettes by 15% in teens. The initial Po, or average retail price of cigarettes in California, is $6.65. The absolute value of Arc Elasticity of Demand is 0.8. (a) What type of good are cigarettes to consumers? (b) So, will consumers be sensitive or insensitive to price change? (c) What is the percentage change in price, or %AP ? (d) What is the new tax on cigarettes? (Hint: Po . %AP = tax ) (e) What is the new total price of cigarette including the new tax? (Hint: P, = Po(1 + %AP )

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