Solved: Problem on price elasticity of demand for cigarettes, Microeconomics

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Problem on price elasticity of demand for cigarettes

Question:

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 20%, by how much should it increase the price? What is the new price? Use the midpoint method in your calculations.

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Microeconomics: Problem on price elasticity of demand for cigarettes

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