Price elasticity of demand estimates come up often when taxes are being placed on goods. Why do you think knowing the price elasticity of demand is important for policy? Despite large taxes on cigarettes (and the predicted decrease in consumption), the tobacco industry has seen steadily rising profits. What can explain this? What do you think would happen to the price elasticity of demand as e-cigarettes become more popular and available?

Q: Supply: -35 + 35P Demand: 205 -25P Where P is the price of good = {1,2,3,4,5,6,7,8} a. Plot and…

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A: Answer to the question is as follows:

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A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

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A: Elasticity of demand depicts how much consumer responds with the change in price level.

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Q: Explain the concept of elasticity of supply with respect to changes in prices and its applications?

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