2 Question 20Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 perpack, and the price elasticity of demand for cigarettes is 0.4.If a $1 tax is added to that price, using the "midpoint method", by what percentage doesthe price change? Round your answer to one decimal place. percentDQuestion 21Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 perpack, and the price elasticity of demand for cigarettes is 0.4.If a $1 tax is added to that price, using the "midpoint method", by whatpercentage will cigarette sales decline in the short run? Round youranswer to one decimal place. percent

The price elasticity of demand measures how a change in the price of a product affects the demand…

Question 20 Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 per pack, and the price elasticity of demand for cigarettes is 0.4. If a $1 tax is added to that price, using the "midpoint method", by what percentage does the price change? Round your answer to one decimal place. percent Question 21 Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 per pack, and the price elasticity of demand for cigarettes is 0.4. If a $1 tax is added to that price, using the "midpoint method", by what percentage will cigarette sales decline in the short run? Round your answer to one decimal place. percent

Question 20 Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 per pack, and the price elasticity of demand for cigarettes is 0.4. If a $1 tax is added to that price, using the "midpoint method", by what percentage does the price change? Round your answer to one decimal place. percent Question 21 Suppose consumers buy 70 million packs of cigarettes per month at a price of $5 per pack, and the price elasticity of demand for cigarettes is 0.4. If a $1 tax is added to that price, using the "midpoint method", by what percentage will cigarette sales decline in the short run? Round your answer to one decimal place. percent

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

See similar textbooks

Similar questions

According to the previous discussion, what factors influence the price elasticity of demand for cigarettes? What other factors not mentioned in the article might influence the price elasticity of demand for cigarettes?
Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year by the avenge person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
Maria has decided always to spend one third of her income on clothing. a. What is her income elasticity of clothing demand? b. What is her price elasticity of clothing demand? c. It Marias tastes change and she decides to spend only one fourth of her income on clothing, how does her demand curve change? What is her income elasticity and price elasticity now?
The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to 1.50, than in the previous December, a 4.3 percent decline. a. Use these data to estimate the price elasticity of demand for subway rides. b. According to your estimate, what happens to the Transit Authoritys revenue when the fare rises? c. Why might your estimate of the elasticity be unreliable?
Suppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
Why is the supply curve with constant unitary elasticity a straight line?
What is the formula for line cross-price elasticity of demand?
The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?