Question 3. Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -40+4P. You estimate the demand for cigarettes to be Qd = 40 - P. You are asked to evaluate the likely effects of a tax on cigarettes equal to $10.00 per pack of cigarettes. Specifically, you are to file a report which predicts by how much this will reduce the amount of cigarettes sold. You are also asked to estimate the proportion of the tax that will be paid by the cigarette companies (sellers), and the proportion of the tax that will be paid by the smokers (consumers) of cigarettes. To do this, you will first need to calculate the current price and quantity of cigarettes sold. a) What is the equilibrium price and quantity of cigarettes? Next you know from your economics class that you will need to know the price elasticity of demand and the price elasticity of supply of cigarettes. b) What is the price elasticity of demand for cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.) c) What is the price elasticity of supply of cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.)

Question 3. Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -40+4P. You estimate the demand for cigarettes to be Qd = 40 - P. You are asked to evaluate the likely effects of a tax on cigarettes equal to $10.00 per pack of cigarettes. Specifically, you are to file a report which predicts by how much this will reduce the amount of cigarettes sold. You are also asked to estimate the proportion of the tax that will be paid by the cigarette companies (sellers), and the proportion of the tax that will be paid by the smokers (consumers) of cigarettes. To do this, you will first need to calculate the current price and quantity of cigarettes sold. a) What is the equilibrium price and quantity of cigarettes? Next you know from your economics class that you will need to know the price elasticity of demand and the price elasticity of supply of cigarettes. b) What is the price elasticity of demand for cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.) c) What is the price elasticity of supply of cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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Need help on D-F. Thank you so much
You are an economist. Your friend started a new business selling masks. She asked for your help in making some important decisions. From the data obtained from her, you computed the Price Elasticity of Demand (PED) of Masks, and found absolute PED in February was 1.86, and since then the absolute PED of Masks declined by 55% in June. (a) Based on the PED of June, you would advise your friend for an increase/decrease/unchanged in the price - (b) The market price of the mask in July was Tk20 per unit. The total revenue earned in July was Tk300. You received the data for August and observed that the price now in August is Tk28 per unit and the quantity of masks sold in August is 12 units. Calculate the absolute value of Price Elasticity of Demand (PED) for masks from July to August.
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