b) In a hypothetical situation, Government of Pakistan wants to put a curb on cigarette smoking through economic policy: i

Subject:EconomicsPrice:2.86 Bought3

Share With

b) In a hypothetical situation, Government of Pakistan wants to put a curb on cigarette smoking through economic policy: i. Studies indicate that the price elasticity of demand for cigarettes is about 0.5. If a pack of cigarettes currently costs Rs.200 and the government wants to reduce smoking by 22 percent, by how much should it increase the price? (1 Marks) ii. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now? (1 Mark) iii. Studies also find that teenagers have a higher price elasticity of demand than adults. Why might this be true? (1 Mark)