Amazon currently sells 100 000 copies per year of an e-book at $14.99. The company estimates that customers would buy 174 000 copies of the same e-book at a price of $9.99. What is the effect on Price elasticity of Demand and Total

Price elasticity of demand (PED)= %change in Quantity Demanded/ %change in price
So, from the question we can see that the PED is elastic as there is a significant increase in demand for the e-book when price is reduced. To further check this we can use the information provided to get PED=74/-33.4=-2.21. If the PED (in absolute terms) is between 0 and 1, it is inelastic. If it is above 1 it is elastic, as is the case here. Total Revenue=Quantity x Price, so, the TR increases from $1,499,000 to $1,738,260.
PED is elastic, Total Revenue rises.

Answered by Connor O. Economics tutor

2213 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

How best to answer a question on how negative externalities lead to market failure.


How to answer elasticity questions


Why have Central Banks introduced Quantitative Easing? What other policies have been introduced in the 21st Century?


What is the difference between actual output and and potential output?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences