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​Economists' estimates of price elasticities can differ​ somewhat, depending on the time period and on the markets in which the price and quantity data used in the estimates were gathered. An article in the New York Times contained the following statement from the Centers for Disease Control and​ Prevention: ​"A 10 percent increase in the price of cigarettes reduces consumption by 3 to 5​ percent." Given this​ information, compute the range of price elasticity of demand for cigarettes. ​Source: Shaila​ Dewan, "States Look at Tobacco to Balance the​ Budget," New York Times​, March​ 20, 2009. According to the​ article, the price elasticity of demand for cigarettes ranges from ______ ​(the lowest end of the range in absolute​ value) to ______. ​(Enter your responses as real numbers rounded to two decimal​ places.)

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sebastiansierraocm

Answer:

Ranges from 0.3 (the lowest end of the range) to 0.5.

Explanation:

Price elasticity of demand if a 10% increase in price reduces consumption by 5%:

PED = 5% / 10%

       = 0.5

Price elasticity of demand if a 10% increase in price reduces consumption by 3%:

PED = 3% / 10%

       = 0.3

In both cases, cigarettes have an inelastic price elasticity of demand, because the quantity demanded changes proportionally less than the price.

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