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14 October, 08:05

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?

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  1. 14 October, 08:31
    0
    -0.6

    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.
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