Question

The manager of the Sell-Rite drug store accidentaly mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store's inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week. i) What is the store's arc elasticity of demand for charcoal? ii) Give an economic interpretation of the numerical value obtained in part a (i).

Answer 1