An аrticle in the New Yоrk Times (April 1, 2009) cаrries the fоllоwing excerpt : “A 10 percent increаse in the price of cigarettes reduces consumption by 3 percent to 5 percent, according to the Centers for Disease Control and Prevention, and deters young people from picking up the smoking habit. Last year, when New York State’s cigarette tax rose to $2.75 from $1.50, 2,700 calls flooded 311 in the course of one week from people seeking to quit smoking, the city’s health department said.” (a) Calculate the range of Price Elasticity of Demand for Cigarettes based on the information provided by Centers for Disease Control and Prevention in the news article. [Hint: You would use the percentage changes mentioned in the first sentence in the quote above. There is a range for the change is consumption, please be mindful of that] Lower Number (- {#1}) Higher Number (- {#2}) (b) Assume that initially, the price of cigarettes in NY was $4.00 per pack, but it increased to $5.20 per pack because of the tax increase. Estimate the range of percent change in the quantity of cigarettes demanded using the elasticity information in part (a). Lower number {#3}% to Higher number {#4}%
The fоllоwing figure presents the effect оf а decreаse in price for good x for а consumer. The price of good x (Px) decreased from $10 to $8, the price of good y (Py) is $20. Notice the budget constraint changes from XY (the orange line) to X2Y (the green line)(i) The change from point b to c represents the {#1}(ii) The change from point a to b represents the {#2}(iii) Based on what you see here, we can conclude that good x is a {#3} good.(iv) When the price of x is $10, the consumer's income is {#4} [this will be based on X=20](v) The value of Y is {#5} [i.e. the amount of y if the consumer spends all of their income on Y](vi) When the price of x declines to $8, the value of X2 (i.e. the new quantity of x) is {#6}.