Consider public policy aimed at alcohol consumption.   a) Studies indicate that the price elasticity of demand for alcohol is about 0.5. If a bottle of rum currently cost $22 and the Government wants to reduce alcohol consumption by 25 percent, by how much should it increase the price?   b) What will be the impact of an increase in price on the revenues of the alcohol manufacturer?     c) If the Government permanently increases the price of alcohol, will the policy have a larger effect on the consumption of alcohol one year from now or five years from now?     d) Studies also find that teenagers have higher price elasticity than do adults. Why might this be true?

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