Questions:

Read the following two documents:

• Effects of taxation increases on consumption (Section 7.6 of Tobacco in Australia: Facts and Issues (by Quit Victoria the Victorian Smoking and Health Program, Australia)
• Effective Interventions for Youth: Price and Affordability (National Clearinghouse on Tobacco and Health - Canada)

1. If the government wishes to discourage tobacco use, why is it important to know the price elasticity of demand?
2. Why is the estimated long-run price elasticity of demand larger than the short-run price elasticity of demand?
3. Why does price elasticity differ for different age groups?
4. Do the Australian, U.S. and Canadian studies discussed in these articles generally agree?