Purchase Solution

# Using Arc Formula for Elasticity

Not what you're looking for?

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?

##### Solution Summary

This solution helps with a problem that applies elasticity.

##### 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 ...

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.