1. A firm is currently charging a price of $150 and is considering a price change. They currently sell 100,000 units of their product. If they raise their price to $165 they will sell 95,000 units of their product. If they decrease their price to $135 they will sell 105,000 units of their product. Calculate the elasticity of both changing from 150 to 165 and changing from 150 to 135. Is the demand of the firm at these prices elastic or inelastic? Should the firm change their price? In which way? (Justify the change in terms of elasticity)

1. A firm is currently charging a price of $150 and is considering a price change. They currently sell 100,000 units of their product. If they raise their price to $165 they will sell 95,000 units of their product. If they decrease their price to $135 they will sell 105,000 units of their product. Calculate the elasticity of both changing from 150 to 165 and changing from 150 to 135. Is the demand of the firm at these prices elastic or inelastic? Should the firm change their price? In which way? (Justify the change in terms of elasticity)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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