Suppose the price elasticity of teenagers' demand for cigarettes is 2.0. If the government imposes a tax on cigarettes that raises the price by 10 percent, by how much will it reduce teenaged smoking?
A) by 5 percent
B) by 10 percent
C) by 15 percent
D) by 20 percent

Question

Quizplus · Accepted Answer

The price elasticity of demand is 2.0, meaning that for every 1% increase in price, the quantity demanded decreases by 2%. Therefore, a 10% increase in price will lead to a 20% decrease in the quantity demanded.

Suppose the Price Elasticity of Teenagers' Demand for Cigarettes Is