Cigarette consumption and consumer spending on cigarettes

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Reference no: EM13735938

According to studies undertaken by the Department of Agriculture, the price elasticity of demand for cigarettes is approximately -0.3 and the income elasticity is approximately 0.5.

a. What effect would a 10% increase in the price of cigarettes due to increased cigarette taxes have on cigarette consumption and consumer spending on cigarettes?

b. If consumer incomes are expected to double over the next decade, what impact would this have on cigarette sales?

Reference no: EM13735938

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