Type of Elasticity Estimate:
Relatively elastic (E>1)
Airline Travel, long run 2.4
Fresh Fish 2.2
New cars, short run 1.2 - 1.5
Unitary elastic (E=1)
Private Education 1.1
Radios and televisions 1.2
Shoes 0.9
Relatively inelastic (E<1)
Cigarettes 0.4
Coffee 0.3
Gasoline, short run 0.2
Long-distance telephone calls 0.1
Required to do:
Question 1: How large of a tax-induced price increase would it take to reduce cigarette consumption by 20 percent? Show work.
Question 2: Identify three goods each for which your demand is (a) elastic and (b) inelastic. What accounts for the difference of elasticity? Explain thoroughly.