Because of a legal settlement over health care claims, in state 1999 the U.S. tobacco companies had to raise the average price of a pack of cigarettes from $1.95 to $2.45. The decline in cigarette sales was estimated at 8 percent. What does this imply for the elasticity of demand for cigarettes? Explain.
the percentage change in price is 23% while that of quantity demanded is 8%. therfore the price elasticity of demand for cigarettes is inelastic. people’s consumption of cigarettes will still not decrease beacuse of their habit and addiction for smoking.