Elasticity Practice Questions

# 06 once you calculate the coefficient think about

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Unformatted text preview: 0.06 Once you calculate the coefficient think about what it means. An Ed = -0.06 indicates that the price elasticity of demand is highly inelastic, as we suspected. The price increase does not cause consumption to fall very much. If the store manager had been hoping to bring in a little extra revenue from the sales of amoxicillin, the plan was successful. Before the price increase the business sold 1500 units at \$8.00 so revenues were \$12,000. After the price increase, sales decreased to 1480 units but the new price is \$10.00 so revenues are \$14,800. Raising the price of amoxicillin helped the pharmacy make an additional \$2,800 in revenue....
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## This document was uploaded on 02/21/2014 for the course ECN 201 at Rhode Island.

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