Answer the following

1. a.Studies indicate that the price elasticity of demand for cigarettes is 0.2. If a pack of cigarettes currentlycosts $5.00. And the government wants to reduce smoking by 40%by how much more should thegovernment tax cigarettes? b.Studies also find that teenagers have a higher price elasticity than adults. What factor would explain this higher elasticity?
2. Sales taxes are a major source of revenue for state governments. But higher taxes mean higher pricesand less product sold by merchants. If the government wants to raise revenue via a sales tax, what assumptions is the government making about the price elasticity of demand?
3. a. A local hotel charges $80.00 per night. The average number of rooms sold at this rate is 50. The hotel decides to increase the room rate to $95.00. The average number of rooms sold at this rate is 40.Compute the elasticity coefficient. What can you conclude about the price elasticity of demand? b. Use the total revenue test to confirm your answer. Explain. c.State two factors that might explain consumer responsiveness.
4. Provide an example identifying the X and the Y that makes sense when the % change in quantity demanded of X / % change in price of Y is negative. Explain.
5. Research and provide the link for the price elasticity of demand for the good or servicemost related to your case study topicand answer the following: a.What is the good or service and itselasticity coefficient? If you are not able to find this number, take an educated guess. Explain the meaning of his number. b. What is the main factor affecting the price elasticity of demand for your case study good or service? Explain.

Examplesfor #5. For example, "most related" in education would be tuition, the price of textbooks or teacher salaries; for healthcare, the price of pharmacy or insurance. You may also use another elasticity like income elasticity- as income changes, the demand for your good or service changes. Or if your topic involves the public or nonprofit sector, find research to indicate that for every $1 spent, there is $X amount of benefit.

Example:Higher education

One of the earliest studies (byCampbell and Siegel (1967), see Becker for detailed citations) estimated the overall demand for four-year colleges and universities. This is an example of a highly aggregated study using time-series data. They estimated the price elasticity of demand for higher education to be

-0.44.

A 1% increase in tuition will decrease the quantity demanded of higher education by .44%, i.e. less than 1%. A coefficient less than 1, means the price elasticity of demandis inelastic.

In other words, peopleare less sensitiveto tuition changes.