Sporty Inc.manufactures high-end designer sports shoes.The price of its most popular shoe "Fast" went up by 10 percent during the last fiscal year.Sporty sold 50 percent more units of Fast in that time period compared to the year before.Estimate the price elasticity for Fast.

Question

Quizplus · Accepted Answer

Price elasticity is a measure of consumers' price sensitivity, which is estimated by dividing relative changes in the quantity sold by the relative changes in price: e = Percent change in quantity demanded/Percent change in price. As such, price elasticity for Fast would be 50/10 = 5.