Using the Average Price and Average Quantity, What Is the Elasticity

question 133

Multiple Choice

Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels?

• A) 1.5
• B) 0.1
• C) 10.0
• D) 0.67

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Definitions:

Test Marketing

The process of launching a new product or service in a limited market area to evaluate its potential before a wider release.

Simulated Test Markets

A marketing technique where consumer reaction to a product is tested in a simulated environment prior to its actual launch.

Standard Test Markets

Controlled market areas where new products or marketing campaigns are tested before a nationwide or international launch.

Cannibalization

A business phenomenon where a company’s new product eats into the sales of its existing products.