10 Colorado legalized the recreational use of marijuana in 2014 to raise revenues through sales and excise taxes. In Denver, 1/8 ounce of marijuana costing $30 had about $8 in various taxes added on. Assuming a price elasticity of demand for marijuana of –0.7

(see Table 2.3), determine the percentage change in quantity that would result from a price increase of $8. Under what circumstances would prices rise by less than the full amount of a tax? How does the price elasticity of demand affect tax revenues?