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According to the source, the elasticity of demand for cigarettes among regular smokers is about 0.3. What does a 10 percent increase in cigarette prices do to the quantity of cigarettes smoked by adults?
AIt falls by about 3 percent
BIt falls by about 30 percent
CIt rises by about 3 percent
DIt does not change at all
Answer & Solution
Correct answer: A. It falls by about 3 percent
1. Demand for cigarettes among regular smokers is described as relatively inelastic, with an elasticity of about 0.3.
2. Applying that elasticity to a 10 percent price increase gives roughly a 3 percent reduction in quantity smoked by adults.
3. This figure directly.
4. A 30 percent reduction would require an elasticity near 3, not 0.3, so that option is inconsistent with the stated value.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.3 | Elasticity and Pricing_
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