Homework Answers
This is a simple problem of price elasticity.
According to definition of price elasticity:
Price elasticity = Percentage change in qty / Percentage change in price
In this case we have :
-0.2 = % change in qty / 15
So % change in qty = - 3
Implication: 15 % rise in price level leads to 3 % fall in qty (demand).
They should expect 3 % fall in sales.
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