Purchase Solution

Estimated Elasticity of Demand for Cigarettes

Not what you're looking for?

Ask Custom Question

College students -0.906 to -1.309

Secondary school students -0.846 to -1.450

Adults, long-run, permanent change in price -0.75

Adults, short-run, permanent change in price -0.40

Adults, temporary change in price -0.30

Based on the data above, discuss why public health officials generally advocate the use of cigarette taxes to reduce teenage smoking, while state and local governments often use these taxes to raise revenue to fund their services.

Hint for answering the question

If the absolute value of the elasticity coefficient is higher than 1, consumers' reaction to price changes is significant. In other words, if the price of cigarettes goes up, people will react to this price increase by smoking much less.
If the absolute value of the elasticity coefficient is lower than 1, consumers' reaction to price changes is not significant. In other words, if the price of cigarettes goes up, smokers will not reduce significantly their purchases of cigarettes. Consequently, a tax increase will result in higher revenue.

Purchase this Solution

Solution Summary

A Complete, Neat and Step-by-step Solution is provided.

Solution Preview

Teens fall under the categories of College students and Secondary school students. For these two categories, we see that

the absolute value of ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.