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Good evening,
Please can you help me with Example 3. I am finiding it hard to get to the final total
Regards
Lee
If the current selling price, is $16 per unit, the demand will be 100 units.
If we drop the price to $15.50 the demand increases to 200 units.
In percentage terms, dropping the price by $0.50 from an existing $16, is a drop of 0.50/16 = 3.125%
In percentage terms, increasing the demand by 100 from an existing 100, is an increase of 100/100 = 100%.
So the elasticity is 100% / 3.125% = 32.
(Same idea for part (b) – you should now be able to do it (and you can obviously check against the answers at the back of the notes)
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