1. For each of the following cases, calculate the arcprice elasticity of demand, and state whether demandis elastic, inelastic, or unit elastic.
a. When the price of milk increases from $2.25 to$2.50 per gallon, the quantity demanded fallsfrom 100 gallons to 90 gallons.
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Expert's answer
2018-02-26T09:15:07-0500
Arc price elasticity of demand = % change in Q / % change in P = [(90 - 100)/100] / [(2.50 - 2.25)/2.25] = - (1/10)/(1/9) = - 0 .9 i.e Inelastic
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