The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 18

One estimate of the price elasticity of demand for cigarettes puts it at 0.4: A 10 percent increase in the price of cigarettes will lead to a 4 percent decline in the quantity demanded.
(a) Does this imply that an increase in the tax on cigarettes is an effective way to reduce smoking?
(b) Does it imply that an increase in the cigarette tax is an effective way for the government to increase its revenue?
(c) If government officials would like both to reduce smoking and to increase government revenue from the tax on cigarettes, how elastic or inelastic do they want the demand for cigarettes to be?