A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:
"As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . .
And ice cream consumption is down 3 percent."
Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001.
Based on the information given, what is the price elasticity of demand for ice cream?
A) 12%
B) 0.75 (in absolute value)
C) 1.33 (in absolute value)
D) We do not have enough information to calculate the elasticity.
B
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