You are in the process of cleaning up your basement which has collections of historical media publications. In one of the historical articles, The Globe and Mail (December 16, 1997) reported that milk consumption declined following price increases: “Since the early 1980s, the price of milk in Canada has increased 22 per cent. As prices rose, the demand for milk fell off. Total [consumption] of milk on a per capita basis dropped . . . to 2.62 hectolitres in 1995 from 2.92 hectolitres in 1986.” Use these data to estimate the price elasticity of demand for milk according to your estimate, what happens to milk producers’ revenue when the price of milk rises? Why might your estimate of the elasticity be unreliable? (Hint: Notice that The Globe and Mail is careless about the distinction between demand and quantity demanded
You are in the process of cleaning up your basement which has collections of historical media publications. In one of the historical articles, The Globe and Mail (December 16, 1997) reported that milk consumption declined following price increases: “Since the early 1980s, the price of milk in Canada has increased 22 per cent. As prices rose, the demand for milk fell off. Total [consumption] of milk on a per capita basis dropped . . . to 2.62 hectolitres in 1995 from 2.92 hectolitres in 1986.”
Use these data to estimate the price
according to your estimate, what happens to milk producers’ revenue when the price of milk rises?
Why might your estimate of the elasticity be unreliable? (Hint: Notice that The Globe and Mail is careless about the distinction between demand and quantity demanded
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