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Suppose the price elasticity of demand for cigarettes is -0.30 and that Russians purchase about 15 billion cigarettes a year. (a)If the tax on cigarettes
Suppose the price elasticity of demand for cigarettes is -0.30 and that Russians purchase about 15 billion cigarettes a year.
(a)If the tax on cigarettes were increased enough to raise the price of cigarettes by 30%, what would be the effect on the quantity of cigarettes demanded?
(b)Is raising the tax on cigarettes a more effective way to reduce smoking if the demand for cigarettes is elastic or if it is inelastic?Explain with the use of supply and demand analysis.
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