By how much should it increase the price

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Reference no: EM13153514

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%, 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 1 year from now or 5 years from now?

c. Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?

Reference no: EM13153514

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