Source: Computations from National Epidemilogic Survey on Alcohol and Related Co

Question

Source: Computations from National Epidemilogic Survey on Alcohol and Related Conditions (NESARC) by A, Goodman, 2008. Use the column b results. Consider a person with income of $20,000, facing an excise tax on cigarettes of $1. This individual is a 40-year-old white, non-Hispanic male who completed high school (education level = 9 in these data). Calculate the elasticities of demand for cigarettes with respect to excise tax, income, and age. Now consider an individual with the exact same characteristics except where race is African American. What is the elasticity of demand for cigarettes with respect to excise tax in this case? Referring to the results presented in Table 3-1, are cigarettes a normal good or inferior good? You may assume, in this case, that we can interpret these results as causal (...which is debatable).

Explanation / Answer

here is a example of how to solve such problem http://www.mbs.edu/home/jgans/mecon/value/Popups/pop_up_examples_calculating_elasticity.htm hope it will help

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