Calculating arc price elasticity of demand

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Arc Price Elasticity. Assume that amazon.com cut the price on a 1.10 ct Princess Cut Diamond Solitaire engagement ring from $4,500 to $2,500, and sales rose from 50 to 75 units per week.

A. Calculate the implied arc price elasticity of demand.
B. Is a further price decrease warranted? Why or why not?

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Solution Preview

Please refer attached file for missing formulas.

A. Calculate the implied arc price elasticity of demand.

Initial Price=P1=$4500
Final Price=P2=$2500
Initial Quantity demanded=Q1=50
Final Quantity ...

Solution Summary

Solution describes the steps to calculate arc price elasticity of demand.

$2.49