Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is 2, then the discount would increase sales by
A) 12.5%.
B) 200%.
C) 50%.
D) 25%.

Question

Quizplus · Accepted Answer

The elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. Here, with an elasticity of 2 and a price decrease of 25%, the increase in sales would be 2 * 25% = 50%.

Walmart Is Thinking About Offering a 25% Discount on a Brand