If a firm finds that it can sell $13,000 of aproduct when its price is $5 per un

Question

If a firm finds that it can sell $13,000 of aproduct when its price is $5 per unit and $11,000 of it whenits price is $6, then: A.the demand for the product is elastic in the $6-$5 pricerange. B.the demand fot the product mus have increased. C.elasticity of demand is 0.74. D.the demand for the product is inelastic in the $6-$5 pricerange. If a firm finds that it can sell $13,000 of aproduct when its price is $5 per unit and $11,000 of it whenits price is $6, then: A.the demand for the product is elastic in the $6-$5 pricerange. B.the demand fot the product mus have increased. C.elasticity of demand is 0.74. D.the demand for the product is inelastic in the $6-$5 pricerange.

Explanation / Answer

Ans A. the demand for the product is elastic in the $6-$5 pricerange. Explanation Elasticity of demand change in quantity demanded    /   change in price pre-change qtydemanded              Pre-change price 767     / 1 2,600      5 =1.47 where elasticity co-efficient is greater than 1 which means thedemand is elastic. 13,000 /5 = 2,600 11,000/6 = 1,833 2600-1833 = 767

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