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    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.