Question

The price of a product is initially $10 and 200 units are sold per day. the price elasticity of demand for the product is -0.8. by how much would the price have to fall to raise sales by 80 units?

A) $2.50
B) $4.00
C) $5.00
D) $6.25

Answer 1

To increase sales by 80 units, the price would have to fall by 100%. None of the given options are correct.

Step-by-step explanation:

To find the price by which the sales need to increase by 80 units, we first need to calculate the percentage change in quantity demanded.

Given that the price elasticity of demand is -0.8, we can use the formula: Price Elasticity of Demand = % change in quantity demanded / % change in price.

Since we want to find the change in price required to increase sales by 80 units, we can set up the equation: -0.8 = 80 / % change in price. Solving for % change in price, we get % change in price = 80 / -0.8 = -100. Therefore, the price would have to fall by 100% to increase sales by 80 units.

It is not possible for the price to fall by 100%. Thus, we cannot determine the exact price change needed to increase sales by 80 units. Therefore, none of the given options (A, B, C, or D) are correct.