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Pricing Example 3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Pricing Example 3

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 8, 2015 at 11:05 am #266228
    newcomer2
    Member
    • Topics: 7
    • Replies: 23
    • ☆

    Sir,

    The answer to example 3 (a) in pricing has been stated as 32.
    The % changes have been calculated by dividing the change by the new values. Is that right? Shouldn’t we be dividing the difference by the original values to get the percentage changes?? I get the answer as 10.

    One more tiny thing sir,
    Part (b) expects the calculation of PED at the selling price of $15 while the answer has been calculated considering $14.5 to be the new selling price. There too the answer is 10 although it has been calculated using the original values as the denominators to calculate the % changes unlike part (a).

    August 8, 2015 at 11:26 am #266233
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    The % change is the % change from the current value to the new value.

    So for part (a), the current price is 16, it changes to 15.5, so the % change is 0.5 / 16 = 31.25%
    At the current price of 16, the current demand is 100, it changes to 200, to the % change is 100/100 = 100%
    So the PED = 100/31.25 = 32

    Part (b) is exactly the same approach starting with a current selling price of 15 and a current demand of 200.
    The price changes to 14.5 which is a % change of 0.5/14.5 = 3.45%
    The demand changes from 300 to 400, which is a % change of 100/300 = 33.33%
    So the PED is 33.33/3.45 = 9.66 (10)

    August 8, 2015 at 11:45 am #266235
    newcomer2
    Member
    • Topics: 7
    • Replies: 23
    • ☆

    Thank you, sir. I thought that it was about the elasticity assuming that the current price was the answer we got in example 2 which is 15 and therefore I thought that we had to calculate the PED if the price changes from 15 to 16.

    This is also why I thought that part (b) was mistakenly given as 15 to be the current price. Thank you, sir 🙂

    August 8, 2015 at 8:58 pm #266279
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    You are welcome 🙂

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