Given the following information, calculate the price elasticity of demand and use it to project how...

Given the following information, calculate the price elasticity of demand and use it to project how the consumer's quantity demanded and expenditure will change in response to a future price increase. Conclude by identifying what your findings suggest about how effective taxing this good would be for a government trying to raise revenue or change behavior. % change (growth rate) = (value new - value old) / value oldElasticity = |% change in quantity / % change in price| Milk Year 1 Year 2 Price $3.00 $3.87 Quantity 46.60 39.79 For the following questions, assume that the Year 2 price increases by an additional 10%.

6. What would be the new Year 2 price after the additional price increase?

7. Given the previously calculated price elasticity of demand, what quantity would the consumer purchase in Year 2 after the price increase?

8. What would be the consumer's expenditure in Year 2 after the price increase?

9. What is the change in the consumer's expenditure between Year 1 and Year 2?

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Rahul Sunny answered 9 months ago

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