Sunday

March 1, 2015

March 1, 2015

Posted by **G** on Friday, July 18, 2008 at 9:30am.

Problem:

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the govenment wants to reduce smoking by 20 percent, by how much should the government increase the price?

The teacher wrote this out for the answer. I am not clear on how it is simplified to come down to the answer on 3.33

P2-2```2(P2-2)

_____= _______=0.5

(P2+2)``P2+2

2P2-4=0.5P2+1

1.5P2=5

P2=3.33

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