Economics: The Basics 1st Edition by Mike Mandel

Exercise 5

Suppose the price elasticity of demand for sports cars is 2. When the price is $40,000 per car, a local dealer sells 100 cars over a year.
a) I f the price per car rises to $44,000, what is the percentage change in the price?
b) What is the percentage change in sports car sales, given the elasticity?
c) What is the new sales level for sports cars?
d) What was the original revenue of the auto dealership from sports car sales? What is the new revenue? Did the price increase reduce or increase revenue?