A major cereal producer decides to lower price from $3.60 to $3 per 15-ounce box.
a. If quantity demanded increases by 18 percent, what is the price elasticity of demand?
b. If, instead of lowering its price, the cereal producer increases the size of the box from 15 to 17.8 ounces, what would you expect that the response would have been? Why?
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