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Cross Elasticity of Demand The government of Philippines is serious about drugs. Possession of drugs is illegal and is severely penalized. However, a black market

Cross Elasticity of Demand

The government of Philippines is serious about drugs. Possession of drugs is illegal and is severely penalized. However, a black market exists which the government has failed to dismantle despite serious attempts. Pres. Duterte, is worried about the situation. In early 2019, a consultant working with the president suggested that the government should increase the price of a pack of cigarettes from P200 to P600. A survey conducted in December 2019 suggested that over the year, the quantity demanded of marijuana decreased from 2,000 kgs per day to just 800 kgs. Calculate the cross elasticity of demand for cigarettes and marijuana, is it a substitute or complementary good?

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