Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 5, Problem 10PA
Subpart (a):
To determine
Percentage change in price.
Subpart (b):
To determine
Impact of the policy change on the consumption.
Subpart (c):
To determine
Impact of the policy change on the consumption.
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Consider public policy aimed at smoking.
a.Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, how much should it increase the price?
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?
Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?
Consider public policy aimed at smoking.
a. Studies indicate that the price elasticity of
demand for cigarettes is about 0.4. If a pack
of cigarettes currently costs $2 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 than do adults. Why
might this be true?
Consider a public policy aimed at smoking.
The government commissioned a research firm, Super Consulting, to conduct a study on the market demand for cigarettes in Malaysia. The firm reported that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price?
If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking after 1 year from now or 5 years from now? Explain
Super Consulting also found that teenagers have higher price elasticity than adults. Why might this be true? Explain
Outline and discuss the appropriate economic policies that can be implemented to reduce smoking.
Chapter 5 Solutions
Essentials of Economics (MindTap Course List)
Ch. 5.1 - Define the price elasticity of demand. Explain...Ch. 5.2 - Define the price elasticity of supply. Explain...Ch. 5.3 - Prob. 3QQCh. 5 - A life-saving medicine without any close...Ch. 5 - The price of a good rises from 8 to 12, and the...Ch. 5 - A linear, downward-sloping demand curve is a....Ch. 5 - Prob. 4CQQCh. 5 - An increase in the supply of a good will decrease...Ch. 5 - Over time, technological advance increases...Ch. 5 - Prob. 1QR
Ch. 5 - List and explain the four determinants of the...Ch. 5 - Prob. 3QRCh. 5 - Prob. 4QRCh. 5 - Prob. 5QRCh. 5 - What do we call a good with an income elasticity...Ch. 5 - How is the price elasticity of supply calculated?...Ch. 5 - Prob. 8QRCh. 5 - Prob. 9QRCh. 5 - Prob. 1PACh. 5 - Prob. 2PACh. 5 - Suppose the price elasticity of demand for heating...Ch. 5 - A price change causes the quantity demanded of a...Ch. 5 - Prob. 5PACh. 5 - The price of coffee rose sharply last month, while...Ch. 5 - Suppose that your demand schedule for pizza is as...Ch. 5 - The New York Times reported (Feb. 17, 1996) that...Ch. 5 - Prob. 9PACh. 5 - Prob. 10PACh. 5 - You are the curator of a museum. The museum is...Ch. 5 - Prob. 12PA
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Similar questions
- If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?arrow_forwardIs elasticity important in the analysis of the market? Why?arrow_forwardThe US Dept of Agriculture estimates that the elasticity of demand for cigarettes is 0.3 for adult smokers and 2.5 for teens. Also the income elasticity of demand for cigarettes is 0.5. A. Suppose the federal government imposes a tax on cigarettes that raises the price by 15 percent. What effect will this have on cigarette consumption by adults? B. Suppose that it was estimated this year there were 2 million teen smokers. What would be the predicted number of teen smokers under the policy in (A.).arrow_forward
- suppose the price of elasticity of demand for used cars is estimated to be 3. what does this mean? what will be the effect on the quantity demanded for used cars if the prices by 10 percent?arrow_forwardThe formula for price elasticity of demand almost looks an average rate of change, the change in demand for a change in price, except that we're using percent change. With average rate of change, the order of the two points doesn't matter, as long as it is consistent. But with percent change, the order of points can matter, because we divide the change by the original quantity. For example, we looked at changes from 50 to 75 cents, so we divided by 50 cents. If we want to consider a price reduction from 75 cents to 50 cents, we would divide by 75 cents. Would the price elasticity of demand be the same? That's what you'll explore now. The formula would change to: (а — 2) / (p1 — рә) 92 P2 Using the two data points here, compute elasticity for Boston using the formula relative to the second point. Round your answer to the nearest hundredth. Boston Subway Fare Annual Ridership (in millions) Year 1980 0.50 158 1981 0.75 143arrow_forwardThe price elasticity of demand for beer among young adults (age 18 to 24) is about 1.30, and the number of highway deaths is roughly proportional to the group’s beer consumption. If a state imposes a beer tax that increases the price of beer by 20%, by how much will the number of highway deaths among young adults decrease?arrow_forward
- 10. Problems and Applications Q10 Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 10%, it should increase the price by If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be from now. % than the effect 3 months Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. Adults are more likely to be addicted to cigarettes. It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive.arrow_forwardYou were gifted a box of 50 thermos bottles that you do not need and you plan to sell them on Ebay. You were initially thinking of asking for $20 per bottle, but then you found out that demand is elastic at $20. Should you lower your asking price? Yes, because when demand is elastic, a lower price increases revenue. Yes, because when demand is inelastic, a lower price increases revenue. No, because when demand is inelastic, a lower price increases revenue. No, because when demand is elastic, a higher price increases revenue.arrow_forwardSuppose the elasticity of demand for used cars is estimated to be 3. What does this mean? What will be the effect on the quantity demanded for used cars if the price rises by 10 Percent? Suppose a university raises its tuition from $3,000 to $3,500. As a result, student enrollment falls from falls from 5,000 to 4,500. Calculate the price elasticity of demand. Is demand elastic, unitary elastic, or inelastic? Suppose the movie theater raises the price of popcorn 10 percent, but customers do not buy any less of it. What does this tell you about the price elasticity of demand, and what will happen to total revenue as a result of the price increase? Suppose the income elasticity of demand for furniture is 3 and the income elasticity of demand for physician services is 0.3. Compare the impact on furniture and physician services of a recession that reduces consumer income by 10%. Opponents of increasing the tax on gasoline argue that the big oil companies just pass the tax…arrow_forward
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