What effect would the price reduction have on total profit

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Reference no: EM132180317

Question: A market research survey suggest that a reduction from £500 to £480 in the price of a particular make of mountain bike would lead to an increase in the quantity sold from 30 to 33 per week. It is estimated that total profit would then be maintained at £3000 per week. On the basis of this data calculate:

(a) The price elasticity of demand for the bike.

(b) the average total co t per bike at a weekly output of:

(i) 30 unit ·

(ii) 33 units.

(c) If the price elasticity of demand was in fact - 0.5, and assuming the same co t data a above, what effect would the price reduction have on total profit?

Reference no: EM132180317

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