The Globe and Mail (December 16, 1997) reported that milk consumption declined following price increases: "Since the early 1980s, the price of milk in Canada has increased 22 per cent. As prices rose, the demand for milk fell off. Total (consumption] of milk on a per capita basis dropped to 2.62 hectolitres in 1995 from 2.92 hectolitres in 1986. Using these data, an estimate of the price elasticity of demand for milk is using the midpoint method. According to your estimate, what happens to milk producers' revenue when the price of milk nses? O It increases It decreases 14. Problems and Applications Q10 Consider pubilic policy aimed at smoking. Studies indicate that the price elastioty of demand for aigarettes is about 0.4. If a pack of cigarettes currently costs $10 and the government wants to reduce smoking by 20%, it should increase the price by If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be than the effect S years Irom now.