Dakota Publishers prints coffee table photo books of the Great Plains and mounta

Question

Dakota Publishers prints coffee table photo books of the Great Plains and mountain states.  The marketing manager generally prices books at $35 each, and sales an average of 4,000 per month.  Last month, she had a sale and priced volumes at $22.50 each, selling 8,500 copies.  Calculate the price elasticity for these books.  Describe how elasticities should be used in pricing decisions.  If you were responsible for setting the price of these volumes, what would you choose and why?                                 

Explanation / Answer

we have price elasticity= (dp/P)/(dq/Q)

=dp= -12.5

p= 35

dq= 4500 and Q= 4000

so

e= -(12.5/35)/(4500/4000)

=-0.31746

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