Choose answer form following
Suppose that two anti-marijuana proposals are currently being debated in Congress. Proposal I will reduce the supply of marijuana and cause its price to rise by 7%. Proposal II will reduce the tax on beer and cause its price to fall by 5%. Based on recent estimates, the price elasticity of demand for marijuana is 1.10 and the cross-price elasticity of demand between marijuana and beer is 1.30. If the only objective of the anti-marijuana proposals is to reduce marijuana consumption by the greatest amount, which proposal would you recommend and by how much will it reduce consumption?
A. Proposal I; consumption will fall by 6.5%
B. Proposal II; consumption will fall by 9.1%
C. Proposal I; consumption will fall by 7.7%
D. Proposal II; consumption will fall by 5.5%
Suppose that two anti-marijuana proposals are currently being debated in Congress. Proposal I will reduce the supply of marijuana and cause its price to rise by 7%. Proposal II will reduce the tax on beer and cause its price to fall by 5%. Based on recent estimates, the price elasticity of demand for marijuana is 1.10 and the cross-price elasticity of demand between marijuana and beer is 1.30. If the only objective of the anti-marijuana proposals is to reduce marijuana consumption by the greatest amount, which proposal would you recommend and by how much will it reduce consumption?
A. Proposal I; consumption will fall by 6.5%
B. Proposal II; consumption will fall by 9.1%
C. Proposal I; consumption will fall by 7.7%
D. Proposal II; consumption will fall by 5.5%