What does the coefficient of elasticity indicate

Reference no: EM133231638

Assignment:

Need help with this homework problem, what throws me off is using the appropriate formula and how to use it. Thanks in advance!

A number of retail stores in San Diego form a "District". In that district, a popular brand of lady's handbag was selling at $400.00 per bag. In one week, the combined sale in the district was 200. The District Manager then declared a sale of 25% on the handbags. As a result, sale of the handbags increased to 550 in the following week.

1. Calculate price elasticity of demand. (Use the following formula: Elasticity =(Change in quantity demanded/Average quantity)/(Change in price/Average price)

2. What does the coefficient of elasticity indicate? Explain your answer.

Reference no: EM133231638

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