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A product’s point price elasticity has been estimated at –1.5. At the initial price of $20, the quantity demanded was 10 units. If the firm cuts the price to $17.50, quantity demanded and sold is expected to increase by____________

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hyderali230

Answer:

Quantity demanded and sold expected to increased by 3.75 units.

Explanation:

Use Price elasticity of demand formula to calculate the quantity demanded and sold:

Price Elasticity of Demand = Change in the Quantity demanded / Chang in Price

- 1.5 = Change in the Quantity demanded / 17.50 - 20.00

- 1.5 = Change in the Quantity demanded / -2.50

-2.50 x -1.50 = Change in the Quantity demanded

Change in the Quantity demanded = 3.75

Quantity Demanded = 10 + 3.75 = 13.75

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