Question

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by: A.50%. B.2%. C.200%. D.25%.

Answer 1

Answer:

A.50%.

Explanation:

The price elasticity of demand formula is:

PED = Change in quantity demanded / change in price

plugging the amounts into the formula we obtain:

2 = X / 25%

Now, simply solve for X:

2 x 25% = X

50% = X

Thus, the total quantity demanded would increase by 50%