Best buy can sell 1200 Sony 40 inch flat screen TVs per week

Best buy can sell 1,200 Sony 40 inch flat screen TV\'s per week nationally if the price is set at $950, and 1,450 TVs if the price is $850 each.

Using a LINEAR demand model

Solution

1. price elasticity = (percent chang in quantity)/ (percent change in price)

= percent change in quantity = (250/1200)*100= 20.9 percent

= percent change in price = (900-1250 /900)*100 = =350/900*100 = -38.9 percent

hence price elasticity = 20.9/-38.9 = -0.5372, the demand is inelastic