1. The analysis accompanying Figure 24-3 investigates the impacts of an increase in cigarette…

1. The analysis accompanying Figure 24-3 investigates the impacts of an increase in cigarette prices. Use the figure to show both the short-run and the long-run impacts of a cigarette price decrease. 2. If the elasticity of aggregate cigarette demand with respect to advertising were 0.15 in absolute value, by extrapolation what effect on cigarette consumption would be caused by a 10 percent reduction in advertising? A 50 percent reduction? A 100 percent reduction? How and why does one’s confidence in prediction change over this range of reductions?

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