If the price elasticity of demand for milk is 0.9 and the price elasticity of supply for milk is 1.1,then a 6% increase in the demand for the milk can be expected to increase the price by 2.5%.

Question

Quizplus · Accepted Answer

The price elasticity of demand and supply affects how quantity demanded or supplied responds to price changes, not directly how demand shifts affect price. A 6% increase in demand does not directly translate to a 2.5% increase in price without considering the interaction between demand and supply elasticities and the market equilibrium adjustment.

If the Price Elasticity of Demand for Milk Is 0