A product has an arc demand elasticity of -3. At a price of $6.00, 1,000 units are sold per period....

Question

A product has an arc demand elasticity of -3. At a price of $6.00, 1,000 units are sold per period. If price is lowered to $5.647, the quantity sold per period will be ______________ units.

David · Accepted Answer

Answer: 
We have arc demand elasticity =-3 
Formula for arc demand elasticity=  
It can be written as (Q2-Q1/P2-P1)* (P1+P2/Q1+Q2) 
We have P1=6, Q1=1000 
                P2=5.647, Q2=? 
Ep= (Q2-Q1/P2-P1)* (P1+P2/Q1+Q2) 
-3= (Q2-1000/-0.353)*(6+5.647/1000+Q2) 
On solving we get Q2=1200.

A product has an arc demand elasticity of -3. At a price of $6.00, 1,000 units are sold per period. If price is lowered to $5.647, the quantity sold per period will be ______________ units.

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