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Calculate the price elasticity of demand

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Reference no: EM132166675

Assume that a ladies bag was selling at 300.00 in a chain of 10 department stores. After one week, the District Manager found only 60 bags were sold. So she authorized all managers to reduce price of the bags in the American way - buy one get one free. This resulted in an average increase of sale of the bags in all stores by 80 percent in the next week.

a). Calculate the price elasticity of demand. (hint: use the arc elasticity formula worked out in Live Session).

b). Interpret your result.

Reference no: EM132166675

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