New price of cigarettes after the tax is imposed

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Compute the price elasticity of demand in each of the following situation. President Trump signs legislation to increase the tax on cigarettes by 62 cents. Assuming the average price of a pack of cigarettes is $4.00 and also that the price will increase by the amount of the tax, then answer the following questions.

a. What is the new price of cigarettes after the tax is imposed?

b. What is the percentage change in price?

c. What is the price elasticity of demand if the industry-wide volume of cigarette sales declines by 7%?

Reference no: EM132639420

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