Question

Hanson Corporation recently changed the selling price of one of its products. Data concerning sales for...

Hanson Corporation recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. Selling Price Unit Sales $79.00 6,080 $80.40 5,800 The product's price elasticity of demand as defined in the text is closest to: -1.48 -1.42 -1.62 -2.68

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Answer #1

Hanson Corporation recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below.

Selling Price

Unit Sales

79

6080

80.40

5800

The product's price elasticity of demand as defined in the text is closest to:

* The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

Price elasticity of demand = % change in quantity demanded / % change in price

% change in quantity demanded = ( 5800 - 6080 ) / ( ( 6080 + 5800 ) 2 ) = -0.047138

% change in price = ( 80.40 - 79 ) / ( ( 79 + 80.40 ) / 2 ) = 0.01756587

Price elasticity of demand = -0.047138 / 0.01756587 = -2.68

Ans: -2.68

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