Answer: $6,600
Explanation: According to the question, The price elasticity of demand for cars is unitary meaning that any percentage increase or decrease in price of a product will give an equal increase or decrease in the demand for the product.
If cars are sold at $20,000 and current sales is 30 units. To increase the quantity sold to 50 units, there must be a price reduction.
what percentage of increase in quantity to be sold do we have? 50 - 30 = 20
20/30 = 66.67 appx 67%
Meaning that a 67% decrease in price of the car will give an equal 67% increase in sales quantity.
The new price of the car will be $20,000 * 67% = $13,400
new price = $20,000 - $13,400 = $6,600
Answer: The answer is $6,600
Explanation:
The unitary elasticity of demand means that the quantity and price must change in the same proportion .
Using the formula
Old quantity - New quantity / Old quantity × 100%
Old quantity = 30 units, New quantity = 50units
30 - 50 / 30 × 100%
-20/30 × 100%
= -0.666 × 100 ignore the minus sign)
= 67% approximately
The percentage change in cars is 67%
0.67 × 20,000 = 13,400
Therefore the new price is
20,000 - 13,400
= 6,600
Therefore the new price is $6,600
