Question

In: Economics

When Target charges $95 for a children's game, they sell 100 units. When they charge $82,...

When Target charges $95 for a children's game, they sell 100 units. When they charge $82, they sell 120 units.

If they were to give away the game for free, how many units (Q) would be demanded?

(Answer is NOT infinity) Enter as a value. ROUND TO THE NEAREST WHOLE NUMBER.

Solutions

Expert Solution

And. When the price will be 0 the the quantity demanded will be 969 units

Solution

Initial price is 95

Initial Quantity demanded is 100

Final price is 82

Final quantity demanded is 120

So, calculating elasticity of demand it is -1.23

Demand is Elastic in nature.

Now,.

When the prices are brought down to zero

Now the change in price is -95 (95)

Change in quantity demanded is we need to find out

So putting values in formula we can derive the final quantity demanded.

Elasticity of demand = (change in price /change in quantity demanded) × (initial price / initial quantity demanded)

-1.23= ( x / 95) × ( 95 ÷ 100)

x = 869

Final quantity demanded at price 0 is 869 + 100 = 969

Rahul Sunny answered 2 years ago
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