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# Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes in about 0.

Consider public policy aimed at smoking.
Studies indicate that the price elasticity of demand for cigarettes in about 0.4. If a pack of cirarettes currently costs \$2 and the government wants to reduce smoking by 20 percent, by how much should the govenment increase the price?
Answer in suppose to be \$3.33. When I try to calculate using formulate I can not get the answer.
Formula is:
P2-P1
_________
(P2+P1)/2
I got some of the calulation:
Percentage change in P=
.20 Quantity/.4 Price Elasticity of Demand = 0.5
P2-2
_______ = 0.5
(P2+2)/2
I have tried the calculation several ways and I can not arrive at the answer of \$3.33.

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