Question

In the mid-1900s, the government in the US announced that for every 10 percent rise in the price of cigarettes, the demand is likely to fall by 6 percent.

If this information is correct, what is the value of the price elasticity of demand for cigarettes?

Answer 1

-0.6

Step-by-step explanation:

Given that,

Percentage rise in the price of cigarettes = 10 percent

Percentage fall in the quantity demand for cigarettes = 6 percent

Price elasticity of demand:

= Percentage change in the quantity demand for cigarettes ÷ Percentage change in the price of cigarettes

= 6 ÷ 10

= 0.6

Therefore, the value of the price elasticity of demand for cigarettes is -0.6.