View the step-by-step solution to:

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.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question