Explore BrainMass

Explore BrainMass

    Using Arc Formula for Elasticity

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    If the price is $15 the company sells 27 units. If price is $12, the company sells 42 units. The company wants to earn a 20% return on sales. ATC=MC=$10. How do I determine the optimal price using the linear approximation method, cost plus pricing and mark-up pricing. How does the arc formula for elasticity factor in to these equations?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:08 pm ad1c9bdddf
    https://brainmass.com/economics/elasticity/using-arc-formula-for-elasticity-31330

    Solution Preview

    Suppose at optimal price P, the quantity sold is Q.
    Average Total Cost = $10
    Therefore, total cost (TC) for all Q units = $10Q
    For a 20% profit, the selling price P = 1.2*TC = $12Q

    Using ...

    Solution Summary

    This solution helps with a problem that applies elasticity.

    $2.49

    ADVERTISEMENT