If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $1.00 to $1.30 would reduce quantities demanded by about

A) 27 percent.
B) 40 percent.
C) 12 percent.
D) 95 percent.

Question

Concepcion Tyler · Accepted Answer

Final Answer : C, Explanation :  Elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price increases by 30% (from $1.00 to $1.30), and with an elasticity of 0.4, the quantity demanded would decrease by 0.4 * 30% = 12%.

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $1.00 to $1.30 would reduce quantities demanded by about

A) 27 percent.
B) 40 percent.
C) 12 percent.
D) 95 percent.

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Learning Objectives

Related questions

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $1.00 to $1.30 would reduce quantities demanded by aboutA) 27 percent.B) 40 percent.C) 12 percent.D) 95 percent.

Definitions

Learning Objectives

Learning Objectives

Related questions

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $1.00 to $1.30 would reduce quantities demanded by about

A) 27 percent.
B) 40 percent.
C) 12 percent.
D) 95 percent.