On June 2, 2008, the State of New York imposed a tax of $1.25 per pack of cigarettes. Prior to the tax, the market price was $5.82 per pack and there were 1 million New York smokers. Assume that each smoker consumes one pack of cigarettes per day. After the tax, N.Y. Health Commissioner estimated that 140,000 people stopped smoking and the market price of cigarettes increased from $5.82/pack to $6.57/pack. Calculate the price elasticity of demand based on these estimates and assumptions.
On June 2, 2008, the State of New York imposed a tax of $1.25 per pack of cigarettes. Prior to the tax, the market price was $5.82 per pack and there were 1 million New York smokers. Assume that each smoker consumes one pack of cigarettes per day. After the tax, N.Y. Health Commissioner estimated that 140,000 people stopped smoking and the market price of cigarettes increased from $5.82/pack to $6.57/pack. Calculate the price elasticity of demand based on these estimates and assumptions.
Chapter6: Elasticity
Section: Chapter Questions
Problem 12QP
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On June 2, 2008, the State of New York imposed a tax of $1.25 per pack of cigarettes. Prior to the tax, the market
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