Calculating point elasticity and optimal price
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Richardson's Stores, Inc. cut prices on Men's Runnng shoes by 2 percent during the first quarter and enjoyed a 4-percent increase in unit sales over the period as compared to a year earlier
a.Calculate the point price elasticity of demand for Richardson's Stores, Inc
b. Calculate the company's optimal shoe price if marginal cost is $10 per unit
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Solution:
Point Elasticity = (% change in Quantity) / (% change in Price)
%change in quantity demanded/%change in price=4%/-2%=-2
Calculate the company's optimal shoe price if marginal cost is $10 per unit
Optimal Price=MC*(Ed/(Ed+1))=10*(-2/(-2+1))=10*2=$20
© BrainMass Inc. brainmass.com December 24, 2021, 8:00 pm ad1c9bdddf>https://brainmass.com/business/business-management/calculating-point-elasticity-optimal-price-236892