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7 April, 21:15

After increasing the price of ceiling fans from $60 to $75, a firm finds that its sales decline from 100 to 80 units. the product's price elasticity (expressed as a positive number) is

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  1. 7 April, 21:33
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    The formula of product's price elasticity is calculated by % Change in Quantity Demanded / % Change in Price.

    % Change quantity Demanded = ($ 75 - $60) / $60 x 100%

    = 25 %

    % Change in price = ($80 - $100) / $100 x 100% = - 20%

    product's price elasticity = 25/20 = 1.25 (economists often drop the negative sign and express the price elasticity of demand as a positive number)
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