Allen Corporation's vice president in charge of marketing believes that every 8% increase in the selling price of one of the company's products would lead to an 11% decrease in the product's total unit sales. The product's absorption costing unit product cost is $10.70. The variable production cost is $1.50 per unit and the variable selling and administrative cost is $4.40 per unit.
-The product's price elasticity of demand as defined in the text is closest to:
A)-1.06
B)-1.96
C)-1.51
D)-1.81

Question

Quizplus · Accepted Answer

F1F1F1S1F1F1F10_d = ln(1 + % change in quantity sold)/ln(1 + % change in price) = ln(1 + (-0.11))/ln(1 + (+0.08))= -1.51

Allen Corporation's Vice President in Charge of Marketing Believes That