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QUESTION 2 A tax increase applied to both cigarettes and alcohol could have a positive effect on public health through reductions in consumption of both
QUESTION 2 "A tax increase applied to both cigarettes and alcohol could have a positive effect on public health through reductions in consumption of both goods. However, this measure would not be sufficient to bridge gaps in prevalence measures and health outcomes between sex and other population groups, given the observed difference in the sensitivity of consumption to price variations." Source: https://iris.paho.org/bitstream/handle/10665.2131303/v40n4a06-enq.pdf Suppose that the coefficient of the price elasticity of demand for cigarettes is 0,4 . If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes? a) 10 percent b) 20 percent c) 25 percent d) 50 percent
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