Question

a) Widget Inc. decides to reduce the price of its product, Widget 1.0 from $100 to...

a) Widget Inc. decides to reduce the price of its product, Widget 1.0 from $100 to $75. The company predicts that the sales of Widget 1.0 will increase from 10.000 units a month to 20.000 units a month. Calculate the price elasticity of demand and explain?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

It is given that when the price of widget falls from $100 to $75 then the quantity demanded increases from 10,000 to 20,000. The elasticity of demand can be calculated by the following formula:

Putting the values:

So, the elasticity of demand is -4. Since the elasticity of demand is -4, as the price falls by 25%, the quantity demanded increases by 100%.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a) Widget Inc. decides to reduce the price of its product, Widget 1.0 from $100 to...
a) Widget Inc. decides to reduce the price of its product, Widget 1.0 from $100 to $75. The company predicts that the sales of Widget 1.0 will increase from 10.000 units a month to 20.000 units a month. Calculate the price elasticity of demand and explain?
The manager of Beta Company is considering to sell its new product at the price of...
The manager of Beta Company is considering to sell its new product at the price of $500 and the price elasticity of demand at the price range is -0.8. (i) What is the marginal revenue from the sales of the product at the demand point? and (ii) As a consultant to this company, are you going to recommend to the company a higher price or a lower price than $500? Answers: a) MR = +$125, and recommend a lower price....
If the price elasticity of demand is 1.0, and a firm raises its price by 10...
If the price elasticity of demand is 1.0, and a firm raises its price by 10 percent, the total revenue will a.) rise by 100% b.) fall by 10% c.) rise by 10% d.) not change
The price of a good increases from $75 to $100. Sales decrease from 1000 to 800....
The price of a good increases from $75 to $100. Sales decrease from 1000 to 800. a. Find price elasticity of ticket demand at these prices and quantities. b. with the same elasticity calculated above, if price decreases from $75 to $50, what would be the new quantity demanded?
Nice Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Nice Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 260 100 % Variable expenses 65 25 % Contribution margin $ 195 75 % Fixed expenses are $180,000 per month. The company is currently selling 1,300 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $54. Since the new component would improve the company's product, the marketing manager...
Salley Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Salley Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 196 100 % Variable expenses 49 25 % Contribution margin 147 75 % Fixed expenses are $1,250,000 per month. The company is currently selling 9,400 units per month. Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would increase the features of the company's product, the marketing...
Price elasticity A company changes its price on widgets from $6.50 to $7.25 and the amount...
Price elasticity A company changes its price on widgets from $6.50 to $7.25 and the amount consumed decreases from 12 million units to 10.5 million units. What is the elasticity of demand? What is the rate of change for this change in price? A company changes its price on widgets from $8.00 to $5.15 and the amount consumed increases from 8 million units to 11.25 million units. What is the elasticity of demand? What is the rate of change for...
The demand function for a product is   QdX = 1000 – 10 Px   and its supply function is...
The demand function for a product is   QdX = 1000 – 10 Px   and its supply function is QsX = 100 + 2 Px Calculate the equilibrium price and equilibrium quantity of the good. a. 75; 250 b. 90; 100 c. 70; 200 d. 100; 100 If the value of the price elasticity of X is 0.45, then a price decrease of X will a. decrease revenues for the suppliers of X b. increase revenues for the suppliers of X c. will...
Assume you are selling a product in which at a price of $10, you can sell...
Assume you are selling a product in which at a price of $10, you can sell 90 units. When the price increases to $11, you can only sell 63 units. Given this change in price and sales, answer the following: What is the price elasticity of demand for your product? Is demand elastic, unit-elastic or inelastic? What is the change in revenue for this product from the price increase?
Montgomery Corporation produces and sells a single product. Data concerning that product appear: Selling price ------------...
Montgomery Corporation produces and sells a single product. Data concerning that product appear: Selling price ------------ $240 per unit Variable expenses -----    144 Contribution margin ---    $96 Fixed expenses are $239,000 per month. The company is currently selling 3,000 units per month. The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $12,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT