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If a 21 percent increase in the price of Cheerios causes a 27 percent reduction in the number of boxes of cereal demanded the

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Answer : Price elasticity of demand = % changes in quantity demanded / % changes in price level

=> Price elasticity of demand = - 27 / 21 = - 1.29

Therefore, here the price elasticity of demand is - 1.29.

Here the price elasticity of demand is greater than 1. This means that here the demand is elastic.

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