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If the elasticity of aggregate cigarette demand with respect to advertising were 0.15 in absolute value,...

If the elasticity of aggregate cigarette demand with respect to advertising were 0.15 in absolute value, by extrapolation (so not mathematically) what effect on cigarette consumption would be caused by a 10% reduction in advertising? A 50% reduction? A 100% reduction? How and why does one’s confidence in prediction change over the range of reductions?

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The advertising elasticity of cigarette demand is given by 0.15 and is given the percentage change in demand /percentage change in advertising. So now if advertising fall by 10%, then the change in demand is a fall of 1.5%. A 50% reduction would cause a reduction in demand of 7.5%. A 100% reduction would cause a reduction in demand of 15%. The larger the reduction in advertising the greater the reduction in demand in percentage terms. The reliability of the estimates will however be lower the greater the percentage reductions as advertising is not the only factor that influences demand.

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