Consider public policy aimed at smoking.a. Studies indicate that the price elasticity of demandfor cigarettes is about 0.4. If a pack of cigarettescurrently costs $5 and the government wantsto reduce smoking by 20 percent, by how muchshould it increase the price?b. If the government permanently increases theprice of cigarettes, will the policy have a largereffect on smoking one year from now or five yearsfrom now?c. Studies also find that teenagers have a higherprice elasticity of demand than adults. Why mightthis be true?
Consider public policy aimed at smoking.a. Studies indicate that the price elasticity of demandfor cigarettes is about 0.4. If a pack of cigarettescurrently costs $5 and the government wantsto reduce smoking by 20 percent, by how muchshould it increase the price?b. If the government permanently increases theprice of cigarettes, will the policy have a largereffect on smoking one year from now or five yearsfrom now?c. Studies also find that teenagers have a higherprice elasticity of demand than adults. Why mightthis be true?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider public policy aimed at smoking.
a. Studies indicate that the
for cigarettes is about 0.4. If a pack of cigarettes
currently costs $5 and the government wants
to reduce smoking by 20 percent, 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 one year from now or five years
from now?
c. Studies also find that teenagers have a higher
price elasticity of demand than adults. Why might
this be true?
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