Believe I got the first part correct. Having issues with C and D Assuming that the price of a pack of cigarettes is $5 before the tax and if the actual price elasticity of demand for California-taxedcigarettes is 0.8,c. how much will the quantity demanded decrease with the new tax?percentd. how much additional revenue will the state take in?billion%24 FRON T PAGECalifornians Vote to Triple Cigarette TaxSacramento, CA-Californians voted to more than triple the state tax on cigarettes from $0.87 apack to $2.87 a pack, beginning April 1, 2017.Anti-smoking groups say the higher price will reduce smoking in the state. They foresee theproportion of smokers falling from the current 11.6 percent of the population to as low as 7.1 percentby 2020.The state treasurer is also applauding the higher price, but for different reasons. According to thestate's Legislature Analyst's Office (LAO), the additional $2 per pack tax will bring in $1.27-$1.61billion a year to the state treasury.Both groups were wrong. Californians continued to smoke about 800 million cigarettes a year,disappointing health advocates. And the state netted much less than $1 billion in new tax revenue,disappointing the state treasurer. These disappointments are due to the fact that Californians caneasily purchase cheaper cigarettes in neighboring states, on Indian reservations, and fromsmuggled supplies.Source: News reports, November 10, 2016.

Price elasticity of demand is defined as the measure of change in the quantity bought of a commodity…

Assuming that the price of a pack of cigarettes is $5 before the tax and if the actual price elasticity of demand for California-taxed cigarettes is 0.8, c. how much will the quantity demanded decrease with the new tax? percent d. how much additional revenue will the state take in? $ billion

Assuming that the price of a pack of cigarettes is $5 before the tax and if the actual price elasticity of demand for California-taxed cigarettes is 0.8, c. how much will the quantity demanded decrease with the new tax? percent d. how much additional revenue will the state take in? $ billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Believe I got the first part correct. Having issues with C and D

Assuming that the price of a pack of cigarettes is $5 before the tax and if the actual price elasticity of demand for California-taxed
cigarettes is 0.8,
c. how much will the quantity demanded decrease with the new tax?
percent
d. how much additional revenue will the state take in?
billion
%24

FRON T PAGE
Californians Vote to Triple Cigarette Tax
Sacramento, CA-Californians voted to more than triple the state tax on cigarettes from $0.87 a
pack to $2.87 a pack, beginning April 1, 2017.
Anti-smoking groups say the higher price will reduce smoking in the state. They foresee the
proportion of smokers falling from the current 11.6 percent of the population to as low as 7.1 percent
by 2020.
The state treasurer is also applauding the higher price, but for different reasons. According to the
state's Legislature Analyst's Office (LAO), the additional $2 per pack tax will bring in $1.27-$1.61
billion a year to the state treasury.
Both groups were wrong. Californians continued to smoke about 800 million cigarettes a year,
disappointing health advocates. And the state netted much less than $1 billion in new tax revenue,
disappointing the state treasurer. These disappointments are due to the fact that Californians can
easily purchase cheaper cigarettes in neighboring states, on Indian reservations, and from
smuggled supplies.
Source: News reports, November 10, 2016.

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