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4973-02-econ

1.1Smokers: Old and New

Explain in terms of elasticities, why placing a tax on cigarettes might reduce teenage smoking while simultaneously raising revenues from older smokers with a more-than-a-pack-a-day habit.

1.3 "Part Forces Hawaiian to Cancel 18 Flights" )
The Honolulu Advertiser
Monday, February 14, 2000
Karen Blakeman
Advertiser Sta_ Writer
Hawaiian Airlines canceled 18 interisland
flights yesterday after inspections
revealed a second airplane with
a worn jackscrew assembly, the part
suspected in the crash of Alaska Airlines
Flight 261.
Two Hawaiian DC-9s were out of
service yesterday, awaiting parts to
the horizontal stabilizers jackscrew
assembly, said Hawaiian Airlines
spokesman Keoni Wagner.
Wagner said passengers on the
canceled flights were rebooked on
flights with similar departure times.
Hawaiian was to have flown 150 interisland
flights yesterday before the
cancellations.
The first worn jackscrew was found
Friday night, when Hawaiian began
Federal Aviation Administrationordered
inspections of its fleet of
15 DC-9s. The FAA last week ordered
airlines nationwide to inspect
nearly 1,100 planes that use jackscrew
assemblies similar to the one suspected
to have failed in Alaska Airlines
Flight 261. The crash killed 88
people.
Alaska Airlines discovered two
more of its airplanes showed wear to
the jackscrew, a 24-inch grooved rod
that moves the stabilizer-the horizontal
wing on the aircraft tail-up
and down. The stabilizer keeps the
aircraft level during flight.
Airlines nationwide had reported
worn jackscrews in more than 22 airplanes
yesterday. Inspections are to
be finished today.
By early yesterday, Hawaiian had
inspected 13 of its fleet of 15 DC-
9s. Wagner said jackscrew assembly
prices had leaped from about $18,000
to as much as $50,000.

(a)How would you characterize demand for the jackscrew assembly-elastic or inelastic? Why?
(b)
Hint: You don't need to do any calculations for this question. ()
(c)The article mentions that the price of these jackscrew assemblies had shot up from $18,000
(d)
to $50,000 in just a few days. Explain this price increase by discussing which curve shifts and
which way it moves. ()

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Explain in terms of elasticities, why placing a tax on cigarettes might reduce teenage smoking while simultaneously raising revenues from older smokers with a ...

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