# Using Arc Formula for Elasticity

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

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?

Â© BrainMass Inc. brainmass.com March 6, 2023, 12:51 pm ad1c9bdddfhttps://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