As the manager of a ski resort, you want to increase the number of lift tickets sold by 8 percent. Your staff economist has determined that the price elasticity of demand for lift tickets is 2. To increase sales by the desired amount, you should decrease the price of a lift ticket by:
A) 2 percent.
B) 4 percent.
C) 8 percent.
D) 16 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is: % change in quantity demanded = elasticity * % change in price. To achieve an 8% increase in sales with an elasticity of 2, the price should be decreased by 4% (8% / 2 = 4%).

As the Manager of a Ski Resort, You Want to Increase