Discussions ME
The U.S. Tobacco Settlement between the major tobacco companies and 46 states
caused the price of cigarettes to jump 45Cent (21%) in November 1998.
Levy and Meara (2005) found only a 2.65% drop in prenatal smoking 15 months later.
What is the elasticity of demand for this group?
Given:
Percentage Change in quantity demanded is (- 2.65%)
Percentage Change in Price is 21%
The formula of elasticity of demand is as follows:
Ed = Percentage Change in quantity demanded / Percentage Change in Price
Ed = (- 2.65%)/21%
Ed = -0.126
Therefore, the correct answer Elasticity of demand is -0.126