Question

A product’s point price elasticity has been estimated at –1.5. At the initial price of $20, the quantity demanded was 10 units. If the firm cuts the price to $17.50, quantity demanded and sold is expected to increase by____________

Answer 1

Quantity demanded and sold expected to increased by 3.75 units.

Step-by-step explanation:

Use Price elasticity of demand formula to calculate the quantity demanded and sold:

Price Elasticity of Demand = Change in the Quantity demanded / Chang in Price

- 1.5 = Change in the Quantity demanded / 17.50 - 20.00

- 1.5 = Change in the Quantity demanded / -2.50

-2.50 x -1.50 = Change in the Quantity demanded

Change in the Quantity demanded = 3.75

Quantity Demanded = 10 + 3.75 = 13.75