The elasticity of supply for chewing tobacco is 2.30 and the elasticity of demand is 0.70. The anti chewing campaign decreases the demand by 18 percent.
We also know that the combined effect of elasticity of supply and demand on equilibrium price can be written as,
The elasticity of supply and demand is denoted as Es and Ed respectively.
Now, substituting the value in the above equation, we get,
Therefore the equilibrium price has decreased by 6 percent.
An anti chewing tobacco campaign has decreased the demand by 18 percent. The equilibrium price of chewing tobacco will decrease bypercent.