According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demand for cigarettes is -0.25. Americans purchase about 360 billion cigarettes each year.
According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demand for cigarettes is -0.25. Americans purchase about 360 billion cigarettes each year.
Chapter12: Medicare
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Problem 1QAP
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Transcribed Image Text:According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demand for
cigarettes is -0.25. Americans purchase about 360 billion cigarettes each year.
Sources: "Response to Increases in Cigarette Prices by Race/Ethnicity, Income, and Age Groups-United States, 1976-
1993," Morbidity and Mortality Weekly Report, July 31, 1998; and Henry Saffer, et al., "E-Cigarettes and Adult Smoking,"
National Bureau of Economic Research Working Paper 24212, revised April 2018.
a. If the federal tax on cigarettes were increased enough to raise the price of cigarettes by 50 percent, the quantity of
cigarettes demanded would
billion per year (enter your numeric response rounded to the nearest
by
whole number).
decrease
increase
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