Flavor Flav has released a new exercise DVD for his loyal fans. If he charges $20...

Question

Question

Flavor Flav has released a new exercise DVD for

his loyal fans. If he charges $20 he expects to sel

l

10,000 copies; if he charges $30, he expects to sel

l 8,000 copies. Calculate the elasticity of demand

for

this product between those two points. Is this dema

nd elastic or inelastic

Answer 1

Answer #1

Elasticity of demand= - (change in quantity/ change in price * current price/current quantity)

Given, change in quantity= 2000 ( 10000-8000)

change in price= -30 (20-30)

current price= 30

current quantity= 8000

therefore, E_d = - (2000/-30 *30/8000)

=- (-66.6*0.003)

=0.233 ( thus the demand is inelastic as it below 1)

Answer 2

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