If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the?

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04-08-2022
Business

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If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the?

Sagot :

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Asmasaadatkhan Asmasaadatkhan · Answer 1 · 2022-08-18T13:18:06-04:00

Answer:

Explanation: According to the law of demand, if all other conditions are held constant, a product or service's demand will drop with an increase in price and increase with a decrease in price.

The formula to calculate the change in price is,

Price elasticity = Sales increase/ Price decrease

So, if the quantity of bananas sold increases by 5% when the price decreases by 10% the change in price will be -0.5 (inelastic)

Price elasticity= 5%/ - 10% = - 0.5 (inelastic)

It is advisable to raise the price to generate more money when demand is inelastic. Lowering the price is good when demand is elastic.

Sagot :

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