Question

How were they able to solve for P?
An end- of- aisle price promotions changes the price

elasticity of a good from – 2 to – 3. If the normal price is $ 10, what should the promotional price be?

Using the suggestion, if elasticity is 2 when price is $10, MC is given by . Solving for MC we have MC = $5.

Knowing MC = $5, we want to find price if elasticity is 3. So we have . Solving for P we have P = $7.50.

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