4. College logo T-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it can sell 50 T-shirts per week. a. What is the price elasticity of demand for the logo t-shirts? b. Indicate if the price elasticity of demand for the logo T-shirt is perfectly elastic, relatively elastic, relatively inelastic, or perfectly inelastic

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Business

Brycen Pruitt

18 December, 20:50

4. College logo T-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it can sell 50 T-shirts per week. a. What is the price elasticity of demand for the logo t-shirts? b. Indicate if the price elasticity of demand for the logo T-shirt is perfectly elastic, relatively elastic, relatively inelastic, or perfectly inelastic

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Answers (1)

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Savannah Gill · Answer 1

Answer: PED = - 1.665

The price demand elasticity is relatively elastic because PED is greater than 1 ... (ignore the minus sign)

Explanation:

Using the formula PED = % change in quantity / % change in price

PED = ((Q1 - Q0) / (Q1 + Q0)) / ((P1 - P0) / (P1+P0)) ... EQU 1 where Q1 = 50 is quantity of product at Price P1 = 10 and Q0 = 25 is quantity of product at Price P0 = 15 and PED is price of elasticity

Substituting figures into equ1

PED = ((50 - 25) / (50+25)) / ((10 - 15) / (10+15))

PED = - 1.665