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Most statistical estimates of the elasticity of demand for cigarettes for teenagers range from -0
Most statistical estimates of the elasticity of demand for cigarettes for teenagers range from -0.7 to -1.4. Consider the different factors that affect the price elasticity of demand. Name two factors that you think make teenage demand for cigarettes more elastic than demand by adults. Briefly explain your answer.
Expert Solution
The teenagers' demand for cigarettes is more elastic than adults demand it because:
1. Income- Teenagers have limited incomes as against their counterpart adults who are well settled in life. Hence, lower incomes and lack of options force them to change their demand more rapidly.
2. Taste and Preference- Teenagers are more experimental as compared to adults who have well-defined preferences. Therefore, adult demands change less with the price and are inelastic.
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