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Calculating the change in demand of imported 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 percent. Will sales of whiskey rise or fall, and by what percentage?

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Solution calculates the change in demand of imported whiskey due to a raise in import tariff.

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Change in price=20%
Price elasticity of demand=-0.20
Change in sales (quantity ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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