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Price Elasticity of Demand of Whiskey

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The price elasticity of demand for imported whiskey is estimated to be -0.20 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%. Will sales of whiskey rise or fall, and by what percentage amount?

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Solution Summary

The solution provides a clear, concise definition of price elasticity and applies that to find the change in quantity demanded of whiskey under the conditions of the question.

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