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QUESTION

Economists have estimated that cigarette smoking declines by 4 percent for every 10 percent increase in cigarette price.

Economists have estimated that cigarette smoking declines by 4 percent for every 10 percent increase in cigarette price. Several states have increased taxes by 100 percent on cigarettes to pay for improvements in education.

a. Based on the information given, what is the elasticity of demand for cigarettes?

b. Does this policy make sense in generating additional revenues? Explain.

Economists have estimated that cigarette smoking declines by 4 percent for every 10 percent increase incigarette price. Several states have increased taxes by 100 percent on cigarettes to pay for...
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