The coefficient of elasticity for this tire was?

7. Stan鈥檚 Discount Tires reduced the price on its Goodyear radial tires from $65


per tire to $55 per tire. The following month, sales of this tire increased from


320 units to 500 units. The coefficient of elasticity for this tire was


a. 1.0


b. 0.63


c. 3.65


d. 1.33|||c. 3.65





Take the absolute value of the percentage change in quantity divided by the percentage change in price:





Percentage change in quantity = (500 - 320) / 320 = 56.25


Percentage change in price = (65 - 55) / 65 = 15.38461





coefficient of elasticity = 56.25 / 15.38461|||The answer is C. The elasticity=56.25%/15.38%=3.65.