The price elasticity of demand for cigarettes by adults is -1.3 while for young smokers it is -0.4. A tax on cigarettes would lead to which of the following effects?
A) a smaller reduction in the quantity of cigarettes demanded by younger smokers than by older smokers
B) the same reduction in the quantity of cigarettes demanded by both age groups
C) a larger reduction in the quantity of cigarettes demanded by younger smokers than by older smokers
D) no impact on the quantity of cigarettes demanded by either group
E) not enough information to predict the impact

Question

Quizplus · Accepted Answer

The price elasticity of demand for cigarettes for younger smokers (-0.4) is lower than for adult smokers (-1.3). This means that younger smokers are less responsive to changes in price compared to adult smokers. Therefore, a tax on cigarettes would have a larger impact on reducing the quantity of cigarettes demanded by younger smokers compared to adult smokers. Choice C is the correct answer.

The Price Elasticity of Demand for Cigarettes by Adults Is