Check out some similar questions!

DaffyDuck23 · Jul 5, 2009, 11:58 AM

The teenager company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4000 of these skateboards. The company believes that the price elasticity for this product is about -2.5. If it decreases the price to $63, what should be the quantity sold?

I say the answer is 5000. Can anyone confirm?

Perito · Jul 5, 2009, 03:48 PM

Originally Posted by ;

The teenager company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4000 of these skateboards. The company believes that the price elasticity for this product is about -2.5. If it decreases the price to $63, what should be the quantity sold?

I say the answer is 5000. Can anyone confirm?

Price elasticity is

$E = \frac {\Delta \, % Quantity}{ \Delta\,% Price} = \frac {\Delta \, % Quantity}{-10%} = -2.5$

$\Delta \, % Quantity = 25%$

125% of 4000 = 5000.

I get the same answer. No guarantees, but it looks right to me.