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April 26, 2015

Homework Help: microeconomics

Posted by Kim on Wednesday, February 21, 2007 at 9:57am.

Just when you really, really want an ice cream cone, the price is rising. But it isn't summertime gouging by manfacturers. The cost of milk fat, the principal ingredient in ice cream, jumped 71% druing the past 6 months to 2.22 at the end of June. As a result, retail prices of ice cream are up 4% from last year, manfacturers say, triggering a 3% drop in comsumption. What is the price elasticty of demand for ice cream? Show calculations

Price elasticity is the percentage change in quantity demanded divided by the percentage change in price. You have presented all the info you need to do this simple calculation.

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