Consider a public policy aimed as e-cigarettes. Assume the elasticity of demand is 0.4. If a Juul with two pods cost $40.00 and the government wants to reduce Juuling by 20 percent then by how much should the price have to rise

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10-02-2022
Business

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Consider a public policy aimed as e-cigarettes. Assume the elasticity of demand is 0.4. If a Juul with two pods cost $40.00 and the government wants to reduce Juuling by 20 percent then by how much should the price have to rise

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ewomazinoade ewomazinoade · Answer 1 · 2022-02-14T13:18:13+01:00

In order to reduce the Juuling by 20%, price would have to rise by 50%.

What is price elasticity of demand?

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one.

What should be the percentage rise in price?

0.4 = 20%/ price

price = 20% / 0.4

= 50%

To learn more about price elasticity of demand, please check: https://brainly.com/question/18850846