Question

In: Economics

At a price of $ 80, the quantity demanded of a given good is 200 units....

At a price of $ 80, the quantity demanded of a given good is 200 units. If the price decreases to $ 45, the quantity demanded increases to 225 units.

1. Calculate the value of the price elasticity.

2. Explain what type of claim it is. Explain in detail what managerial action corresponds to take, raise the price, lower it or leave it the same.

3. Make the graphic representation.

4. Answer correctly if it is elastic, inelastic or unitary, there is the mathematical procedure and the formulas to be able to do it.

Solutions

Expert Solution

2.price elasticity of demand is -0.28

The value is less than 1 and therefore price elasticity of demand is inelastic.

A fall in price when demand is inelastic,leads to decrease in total revenue.so the managerial decision would be to increase the price in order to increase the total revenue.

Rahul Sunny answered 1 year ago
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