Say a study reveals that price elasticity of demand for teenage smoking was -0.5. If the government imposed a tax on cigarettes the total expenditure teenagers spend on buying cigarettes would

Question

Quizplus · Accepted Answer

Since the price elasticity of demand is -0.5, demand is inelastic. This means that a price increase (due to a tax) would lead to a less than proportionate decrease in quantity demanded, resulting in an increase in total expenditure.

Say a Study Reveals That Price Elasticity of Demand for Teenage