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ECON Genius...want 10 points???
Can you help with this problem??
The price elasticity of demand for imported whiskey is estimated to be -.20 over a wide interval of prices. The Federal Government decides to raise the import tariff on foreign whiskey, causing its price to rise by 20 percent. Will sales (units sold) of whiskey rise or fall, and by what percentage. Please show all steps in your calculation.
2 Answers
- 1 decade agoFavorite Answer
Sales of whiskey will fall by 4%. Finding the solution to this problem is simple algebra. The equation for the price elasticity of demand is Elasticity=%Change Quantity Demanded / %Change Price
Therefore, we just plug in the figures we are given and solve for % Change Quantity Demanded
-.2 = X / .2
Multiple -.2 by .2 and we get -.04 which is 4% which is the % Change in Quantity Demanded.
- Anonymous1 decade ago
that's a trick question, you didn't state which country , and if any alcoholics work on the delivery trucks..
