Hanvold Company recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. $$\begin{array} { c c }
\text { Selling Price } & \text { Unit Sales } \
\$ 30.00 & 1,700 \
\$ 32.00 & 1,410
\end{array}$$ The product's price elasticity of demand as defined in the text is closest to:
A)-3.14
B)-3.55
C)-4.72
D)-2.90

Question

Hanvold Company recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. $$\begin{array} { c c } 
\text { Selling Price } & \text { Unit Sales } \
\$ 30.00 & 1,700 \
\$ 32.00 & 1,410
\end{array}$$ The product's price elasticity of demand as defined in the text is closest to:
A)-3.14
B)-3.55
C)-4.72
D)-2.90

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. The percentage change in quantity is $(1410 - 1700) / 1700 = -0.1706$ and the percentage change in price is $(32 - 30) / 30 = 0.0667$. Thus, elasticity is $-0.1706 / 0.0667 \approx -2.56$, which is closest to -2.90.

Hanvold Company Recently Changed the Selling Price of One of Its