Question

Even Quik Trip has a pet e-mouse. Quik Trip has been selling its pet e-mouse for $49 each. Quik Trip's variable cost per unit is $25. Quik Trip is thinking about raising its price by $5 per unit. By what percent must Quantity demanded change so that Quik Trip will have the same total contribution before and after the change in price? (Rounding: tenth of a percent. Report 36.5%, for example, as "35.6". Use a negative sign if your answer is negative.)

ANS: -17.2

Answer 1

Assuming that company currently sells 10,000 pet e-mouse
Instead of 10,000, any other units can be assumed. The percent change would remain same.
Calculation of current total contribution margin
Contribution margin	Total sales revenue - Total variable costs
Contribution margin	(10000*49)-(10000*25)
Contribution margin	490000-250000
Contribution margin	$240,000
Calculation of new contribution margin per unit
New contribution margin	(49+5)-25
New contribution margin	54-25
New contribution margin	$29.00
No of units to be sold in order to earn same total contribution margin as $240,000
No of units to be sold	240000/26
No of units to be sold	8275.86
Calculation of percentage change in units to be sold
% change in units to be sold	(8275.86-10000)/10000
% change in units to be sold	-1724.14/10000
% change in units to be sold	-17.2%
Thus, percent change in quantity demanded should be -17.2%.