Consider public policy aimed at smoking.

a. Studies indicate that the price elasticity of demand for cigarettes is about .35. If a pack of cigarettes currently costs $6 and the government wants to reduce smoking by 20% by how much should it increase the price?

b. If the government permanently increases the price of cigarette, 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 of demand than adults. Why might this be true?