If the price elasticity of demand for cigarettes is 0.4,
A) The demand is very elastic.
B) A 10 percent increase in price will cause quantity demanded to fall by 40 percent.
C) The demand is very inelastic.
D) A 5 percent decrease in price will cause quantity demanded to rise by 10 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand for cigarettes is less than 1, indicating that the demand is inelastic. A 10 percent increase in price would cause the quantity demanded to fall by less than 10 percent, and a 5 percent decrease in price would cause the quantity demanded to rise by less than 5 percent.

If the Price Elasticity of Demand for Cigarettes Is 0