Answer to Question #312212 in Microeconomics for Pat

Question #312212

Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year,

a. If the price is increased to $600, how many sailboards will the company be able to sell each year?

b. How much will total revenue change as a result of the price increase?


1
Expert's answer
2022-03-16T11:10:15-0400

Will be able to sell:

Less by 30%

"10,000\\times 0.7=7,000"

Revenue

Price change

"7000\\times600=4,200,000"

Before change

"10,000\\times500=5,000,000"


Total revenue will decrease by $800,000


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