question archive Assume that the elasticity of demand for chewing tobacco is 0
Assume that the elasticity of demand for chewing tobacco is 0
Subject:EconomicsPrice:2.88 Bought3
Assume that the elasticity of demand for chewing tobacco is 0.60 and the elasticity of supply is 2.40. Suppose an anti-chewing tobacco campaign decreases the demand for chewing tobacco by 18%. By how much will the equilibrium price for chewing tobacco increase or decrease?
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The elasticity of demand for chewing tobacco is 0.60. Now, if due to some reason, the demand of chewing tobacco decreases by 18%, the equilibrium price for chewing tobacco will change:
Thus price of chewing tobacco must have increased by 30% which leads to the decrease in its demand by 18%
