Answer
a) If the government wants to reduce smoking by 20% they should increase the price by 50%.
b) The price change will have a larger effect on smoking five years from now.
c) This might be true because most teenagers don't have a steady source of income so if the price increases they won't want to purchase the item anymore.
Work Step by Step
a) Price elasticity of demand = $\frac{percent change in quantitydemanded }{percent change in price}$
so $.4 = \frac{20%}{x%}$
solving for x gets 50 so the percent change in price is 50%
b) The demand is more elastic in the long run because there are no very good substitutes for people addicted to cigarettes in the short term but if the price remains very high people will start to find long term substitutes making the demand more elastic.
c) If you think about teenagers they don't have a steady source of income so if the price of something they wanted goes up a lot they are willing to not buy it rather than spend more of their income on it. So the percent change in quantity demanded will be greater than the percent change in price.
