A local supermarket lowers the price of its vanilla ice cre

. A local supermarket lowers the price of its vanilla ice cream from $3.50 per half gallon to $3. Vanilla ice cream unit sales increase by 20 percent. The store manager notices that the unit sales of chocolate syrup increase by 10 percent. What is the price elasticity of vanilla ice cream? Round to the nearest tenth and drop the minus sign when submitting your answer

Solution

Percentage of decrease in price of vanilla ice cream = 0.5 / 3.5 x 100 = 14.28%

Percentage increase in sales = 20 %

Price elasitcity of demand of vanilla ice cream = 20 / 14.28 = 1.4.

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