Q.Consider public policy aimed at smoking

a. studies indicate that the price elasticity of demand for cigarettes is about 0.4. if a packet cigarettes is currently priced at $6 and the govt wants to reduce smoking by 20% by how much should it increase in price through levying a tax.

b. if the govt permanently increases the price of cigarettes will the policy have a larger effect on smoking one year from now or five years from now? explain

c. studies also find that teenagers have higher price elasticity of demand for cigarettes than adults. why might this be true.

Q. Surette buys only orange juice and yoghurt

a. in 2017, surette earns$20000, orange juice is priced at $2 a carton and yoghurt is priced at $4 a tub. Draw surettes budget constraint

b Now suppose that all prices increase by 10 cents in 2018 and that surettes salary increases by 10per cent as well. draw surettes new budget constraint. how would surettes optimal combination of orange juice and yoghurt in 2018, compare her optimal combination in 2017?.