Calculate the implied arc income elasticity of demand

Reference no: EM13213227

Arc income elasticity Deluxe Carpeting a leading manufacturer of carpeting sold 28 million square yards of carpeting at a price of $16 per yard. This year, GNP per capita is expected to fall from $19,000 to $17,000 as the nation enters a recession. Deluxe expects that current-year sales to fall to 20 million square yards.

a. Calculate the implied arc income elasticity of demand.

b. Given a price elasticity coefficient of -2.5, to what level would price have to be lowered to maintain sales at a level of 28 million square yards?

Reference no: EM13213227

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