What does the following statement imply about price elasticity of demand? "Government tries to reduce cigarette consumption with an extra 50 cent tax per pack.Policy raises government revenue but fails to curb smoking."
A)demand for cigarettes is elastic
B)demand for cigarettes is inelastic
C)elasticity of demand for cigarettes is equal to one
D)elasticity of demand for cigarettes is close to infinity
E)elasticity of demand for cigarettes equals 0.5

Question

Quizplus · Accepted Answer

The fact that the extra tax did not curb smoking implies that the demand for cigarettes is inelastic, meaning that consumers are not very responsive to changes in price. If demand were elastic, there would be a significant decrease in cigarette consumption as a result of the price increase.

What Does the Following Statement Imply About Price Elasticity of Demand