You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.5. If you want to increase your sales quantity by 6 percent through a price change, what should you do to the price?
A)reduce price by 12 percent
B)increase price by 12 percent
C)reduce price by 3 percent
D)increase price by 3 percent

Question

Quizplus · Accepted Answer

The price-elasticity coefficient of 0.5 means that for every 1% change in price, the quantity demanded changes by 0.5%. To increase sales by 6%, you need to reduce the price by 12% (6% / 0.5 = 12%).

You Are the Only Seller of Eggs in Town, and the Price-Elasticity