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 of whiskey rise or fall, and by what percentage amount?

Price elasticity is (%change-Q)/(%change-P)

So, simply plug in what what you have in the formula.
(%change-Q) / 20 = -.2 -- solve for %change-Q

fall by 4%

To determine the effect of a price change on sales, we can use the concept of price elasticity of demand. Price elasticity of demand measures the sensitivity of the quantity demanded to a change in price. A negative price elasticity value means that the quantity demanded is inversely related to price.

In this case, the price elasticity of demand for imported whiskey is estimated to be -0.20. This means that for every 1% increase in price, the quantity demanded of imported whiskey would decrease by 0.20%.

Given that the federal government raises the import tariff on foreign whiskey, causing its price to rise by 20%, we can calculate the expected change in sales.

First, let's calculate the percentage change in price:
Percentage change in price = 20%

Now, we can calculate the expected change in quantity demanded:
Expected change in quantity demanded = Price elasticity of demand * Percentage change in price
Expected change in quantity demanded = -0.20 * 20% = -4%

Since the calculated expected change in quantity demanded is negative (-4%), it means that the sales of whiskey are expected to fall by 4%.

Therefore, the sales of whiskey will fall by 4% due to the 20% increase in price caused by the raised import tariff.