A business currently selling 10,000 units of its product per month, plans to reduce the retail price…
Expected sales are approximately 11,500 units per month. The price change is (0.90 - 1)/1 x 100 = -10%, so the estimated quantity change is -1.5 x -10% = 15%. The increase…
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A business currently selling 10,000 units of its product per month, plans to reduce the retail price from ₹ 1 to ₹ 0.90. It knows from previous experience that the price elasticity of demand for this product is (–) 1.5. Assuming no other changes, the sales the business can now expect each month will be approximately:
Answer and explanation
Correct answer D
Expected sales are approximately 11,500 units per month. The price change is (0.90 - 1)/1 x 100 = -10%, so the estimated quantity change is -1.5 x -10% = 15%. The increase is 10,000 x 15% = 1,500 units, giving 10,000 + 1,500 = 11,500 units.
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Karnataka SET (KSET)