QuestionFebruary 2, 2026

itempts square square square 10. Problems and Applications Q10 Consider public policy almed at smoking. Studies Indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of dgarettes currently costs 5 and the government wants to reduce smoking by 10% It should increase the price by 50% If the government permanently increases the price of cigarettes the effect on smaking 1 year from now will be smaller than the effect 3 m from now. Studies also find that teenagers have a higher price elasticity of cemand than do adults. Which of the following statements are consistent with this result? Check all that apply. It is legal for adults to consume alcohal so many choose to spend their money on that good rather than cigarettes. Adults are more likely to be addicted to cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive. Average /3

itempts square square square 10. Problems and Applications Q10 Consider public policy almed at smoking. Studies Indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of dgarettes currently costs 5 and the government wants to reduce smoking by 10% It should increase the price by 50% If the government permanently increases the price of cigarettes the effect on smaking 1 year from now will be smaller than the effect 3 m from now. Studies also find that teenagers have a higher price elasticity of cemand than do adults. Which of the following statements are consistent with this result? Check all that apply. It is legal for adults to consume alcohal so many choose to spend their money on that good rather than cigarettes. Adults are more likely to be addicted to cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive. Average /3
itempts square square square 10. Problems and Applications Q10 Consider public policy almed at smoking. Studies Indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of dgarettes currently costs 5 and the government wants to reduce smoking by 10% It should increase the price by 50% If the government permanently increases the price of cigarettes the effect on smaking 1 year from now will be smaller than the effect 3 m from now. Studies also find that teenagers have a higher price elasticity of cemand than do adults. Which of the following statements are consistent with this result? Check all that apply. It is legal for adults to consume alcohal so many choose to spend their money on that good rather than cigarettes. Adults are more likely to be addicted to cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive. Average /3

Solution
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Answer

Adults are more likely to be addicted to cigarettes; Teenagers do not have as much income as adults, so they are more price sensitive. Explanation 1. Understand Price Elasticity Price elasticity of demand measures how quantity demanded responds to price changes. A price elasticity of 0.2 means a 1% increase in price leads to a 0.2% decrease in quantity demanded. 2. Calculate Required Price Increase To reduce smoking by 10%, use the formula: **Elasticity = \frac{\% \text{ change in quantity}}{\% \text{ change in price}}**. Rearrange to find the required price change: \(\% \text{ change in price} = \frac{\% \text{ change in quantity}}{\text{Elasticity}} = \frac{-10\%}{0.2} = -50\%\). 3. Analyze Time Effect The long-term effect on smoking is smaller than the short-term effect because consumers adjust their habits over time. 4. Evaluate Statements - Adults are more likely to be addicted to cigarettes: Consistent, as addiction reduces elasticity. - Teenagers do not have as much income as adults, so they are more price sensitive: Consistent, as lower income increases elasticity. - It is legal for adults to consume alcohol so many choose to spend their money on that good rather than cigarettes: Not directly related to elasticity differences.

Explanation

1. Understand Price Elasticity<br /> Price elasticity of demand measures how quantity demanded responds to price changes. A price elasticity of 0.2 means a 1% increase in price leads to a 0.2% decrease in quantity demanded.<br /><br />2. Calculate Required Price Increase<br /> To reduce smoking by 10%, use the formula: **Elasticity = \frac{\% \text{ change in quantity}}{\% \text{ change in price}}**. Rearrange to find the required price change: \(\% \text{ change in price} = \frac{\% \text{ change in quantity}}{\text{Elasticity}} = \frac{-10\%}{0.2} = -50\%\).<br /><br />3. Analyze Time Effect<br /> The long-term effect on smoking is smaller than the short-term effect because consumers adjust their habits over time.<br /><br />4. Evaluate Statements<br /> - Adults are more likely to be addicted to cigarettes: Consistent, as addiction reduces elasticity.<br /> - Teenagers do not have as much income as adults, so they are more price sensitive: Consistent, as lower income increases elasticity.<br /> - It is legal for adults to consume alcohol so many choose to spend their money on that good rather than cigarettes: Not directly related to elasticity differences.
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