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# 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

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