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Q.9 Because of a legal settlement over state health care claims, in 1999 the U.S. tobacco companies had to raise the average price of a pack of cigarettes from $1.95 to $2.45. The decline in cigarette sales was estimated at 8%. What does this imply for the elasticity of demand for cigarettes? Explain.
2Q.10The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1, and +0.5, respectively. Interpret these coefficients. What does it mean if an income-elasticity coefficient is negative?