An article in the New York Times (April 1, 2009) carries the following excerpt :

"A 10 percent increase in the price of cigarettes reduces consumption by 3 percent to 5 percent, according to theCenters for Disease Control and Prevention, and deters young people from picking up the smoking habit. Last year,when New York State's cigarette tax rose to $2.75 from $1.50,2,700 calls flooded 311 in the course of one week from people seeking to quit smoking,the city's health departmentsaid."

(a) Calculate the range of Price Elasticity of Demand for Cigarettes based on the information provided by Centers for Disease Control and Prevention in the news article. [Hint: You would use the percentage changes mentioned in the first sentence in the quote above. There is a range for the change is consumption, please be mindful of that]

Lower Number (- Answer)

Higher Number (- Answer)

(b) Assume that initially, the price of cigarettes in NY was $4.00 per pack, but it increased to $5.20 per pack because of the tax increase. Estimate the range of percent change in the quantity of cigarettes demanded using the elasticity information in part (a).

Lower number Answer% to Higher number Answer%