Question

The United States Tobacco Settlement between the major tobacco companies and 46 states caused the price of cigarettes to jump​ 21% (45¢ per​ pack). Levy and Meara​ (2006) found only a​ 2.65% drop in prenatal smoking 15 months later. What is the elasticity of demand for this​ group? The elasticity of demand is nothing. ​ (Enter a numeric response using a real number rounded to three decimal​ places.)

Answer 1

Answer:

B. The elasticity of demand is -0.126

Explanation:

% Change in Quality demand = -2.65% (this is negative because of drop in prenatal smoking)

% Change in price = 21%

Elasticity of demand is given by the formula below:

Elasticity of demand = % change in quantity demanded ÷ %change in price

Elasticity of demand = -2.65 / 21

Elasticity of demand = -0.126