It Has Been Estimated That the Price Elasticity for Cigarettes

question 59

Multiple Choice

It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases by 5 percent, the government would need to tax cigarettes enough to:

• A) raise the price by 0.82 percent.
• B) lower the price by 0.82 percent.
• C) raise the price by 30.5 percent.
• D) lower the price by 30.5 percent.

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Definitions:

Real Hourly Compensation

The wages received by a worker, adjusted for inflation, reflecting the actual purchasing power of the earnings.

United States

A country in North America known for its significant global economic, cultural, and political influence, consisting of 50 states and a federal district.

Hourly Pay

The compensation received by an employee for each hour worked.

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Analyses that compare economic variables, like GDP, inflation rates, or living standards, across different countries.