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If the price elasticity of demnd for milk is -0.80, a 16% increase in sales implies a reduction price by ......?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 3SQP

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Question

If the price elasticity of demnd for milk is -0.80, a 16% increase in sales implies a reduction price by ......?

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Expert Solution

Step 1

Ed or price elasticity= % Change in quantity/% change in price

(-)0.8= 16%/% change in price

% change in price= (-)16/0.8

% change in price =(-)20%

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