Question:
Suppose the price elasticity of demand for cigarettes is - 0.46 in the short run and -1.89 in the long run, the income elasticity of demand for cigarettes is 0.50 and the cross-price elasticity of demand between cigarettes and alcohol is -0.70 Suppose also that the price of cigarettes, the income of consumers, and the price of alcohol all increase by 10 %. Calculate by how much the demand for cigarettes will change in the (a) short run and (b) long run.