The average price for a pack of cigarettes in the United States in 2010 is $5.32. On average the combined state and federal excise tax on cigarettes is $2.50, or about 50% of the price of a pack. Estimates of the price elasticity of demand for cigarettes suggest a price elasticity of around 0.45. How does knowledge of the price elasticity help you to understand how the imposition of excise taxes on cigarettes will affect the revenue earned by cigarette companies, the expenditures on cigarettes by smokers and the tax revenue received by government?