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?
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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