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Economics

A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "as a result (of the increase in milk prices), retail prices for ice cream are up 4 percent from last year... and ice cream consumption is down 3 percent." Given this information, compute the price elasticity of demand for ice cream. Will the revenue received by ice cream suppliers have increased or decreased following the price increase? briefly explain.

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Steven Davis

  1. Do a little research and then take a shot. what do you think.
    Hint: price elasticity is (%change Q)/(%change P) -- you are given both.

    Hint 2: Pre-price change Revenue received is P*Q. Adjust P and Q accordingly. Does total revenue go up or down?

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    economyst

  2. .75

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    zdcv

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