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According to S Sackrin of the US Department of Agriculture the price elasticity of demand for cigarettes is between

According to S. Sackrin of the U.S. Department of Agriculture, the price elasticity of demand for cigarettes is between - 0.3 and - 0.4, and the income elasticity of demand is about 0.5. a. Suppose the federal government, influenced by findings that link cigarettes and cancer, were to impose a tax on cigarettes that increased their price by 15%. What effect would this have on cigarette consumption? b. Suppose a brokerage house advised you to buy cigarette stocks because if incomes were to rise by 50% in the next decade, cigarette sales would be bound to spurt enormously. What would be your reaction to this advice?

Apr 30 2020 View more View Less

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