Use the following table for question

-If the government wants to decrease the quantity consumed of cigarettes 20%,what percentage of tax would they have to levy on cigarette consumption?
A)20%
B)30%
C)40%
D)50%

Question

​Use the following table for question
 
-If the government wants to decrease the quantity consumed of cigarettes 20%,what percentage of tax would they have to levy on cigarette consumption?​
A)​20% 
B)30% 
C)40% 
D)​50%

Quizplus · Accepted Answer

According to the table provided, the price elasticity of demand for cigarettes is -0.5, indicating that for every 1% increase in the price of cigarettes, the quantity consumed will decrease by 0.5%. To achieve a 20% decrease in quantity consumed, the government must increase the price by 40% (20%/0.5%). Therefore, the percentage of tax that they would have to levy on cigarette consumption is 40%.

​Use the Following Table for Question

Use the Following Table for Question