Describe the price elasticity of demand

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The price of a product is $5 and the quantity demanded is 250 units/week. When the price is increased to $7 the quantity demanded falls to 125.

a. Calculate the percent change in price and percent change in quantity demanded.

b. Calculate the price elasticity of demand using the arc and midpoint formula. Explain what this describes (ex. for every 1% change in price....)

c. Describe the price elasticity of demand (elastic, inelastic)

d. Describe whether the pricing decision was correct assuming the firm desires to maximize total revenue.

Reference no: EM131197929

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