Figure 44 Panel (a) Panel (b) P\" 1 10. Refer to Figure 44The graphs show the de

Question

Figure 44 Panel (a) Panel (b) P" 1 10. Refer to Figure 44The graphs show the demand for cigarettes. In Panel (a), the arrows are consistent with which of the following events? a. The price of marijuana, a complement to cigarettes, increased. b. Mandatory health wamings were placed on cigarette packages. c. Several foreign countries banned U.S. cigarettes in their countries d. A tax was placed on cigarettes. 111. Refer to Figure 4-4. The graphs show the demand for cigaretes. In Panel (a), the arows are consistent with which of the following events? a. Tobacco and marijuana are complements and the price of marijuana decreased. b. Tobacco is a "gateway drug and the price of marijuana increased c. The price of cigarettes increased d. The arrows are consistent with all of these events 112. Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the arrows are consistent with which of the following events? a. The price of cigarettes increased. b. A tax was placed on cigarettes c. The prohibition of cigarette advertisements on television. d. Tobacco and marijuana are complements and the price of marijuana decreased 113. For the general population, a 10 percent increase in the price of cigarettes leads to a a. I percent reduction in the quantity demanded of cigarettes. b. 4 pereent reduction in the quantity demanded of eigarettes. c. 10 percent reduction in the quantity demanded of cigarettes. d. 12 percent reduction in the quantity demanded of cigarettes

Explanation / Answer

110) d is correct

Tax on cigarettes increases the price of cigarettes which leads to movement up along the demand curve.

111) c is correct

Change in price only causes a movement along the demand curve. Increase in price causes decrease in quantity demanded.

112) c is correct

Panel b shows decrease in demand which happens when there is a prohibition on advertisement of cigarettes.

113) b is correct

Generally the demand for cigarettes is inelastic. So a 10% increase in prices reduces the demand by 4%.

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