Pashicke Corporation Recently Changed the Selling Price of One of Its

question 68

Essay

Pashicke Corporation recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below. $$\begin{array} { c c } \text { Selling Price } & \text { Unit Sales } \\\$ 46.00 & 7,300 \\\$ 44.00 & 7,840\end{array}$$ The product's variable cost is $17.10 per unit.
Required:
a Compute the product's price elasticity of demand as defined in the text to two decimal places.
b. Compute the product's profit-maximizing price according to the formula in the text.

---

Definitions:

Net Income

The net income a corporation earns once all costs, taxes, and expenses are deducted from the total revenue.

Earnings Per Share

A measure of a company's profitability, calculated as net income divided by the number of outstanding shares of its common stock.

Dividends

Funds disbursed to members of a corporation, commonly sourced from the company's profits.

Market Price

The going rate at which one can buy or sell an asset or service in the market.