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Mod4 cv3

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  • 1. Module 4C ELASTICITY CALCULATION APPLICATIONS OBJECTIVE: Usually in demand price elasticity calculations, we are given prices and quantities and we solve for the elasticity coefficient. However, elasticity analysis has broader applications. If the elasticity coefficient is known at a particular price and quantity, then we can make the following calculations: 1) We can calculate the price (lower or higher) required to achieve a certain quantity. 2) We can determine the quantity that would be sold given a certain price change. INPUTS (will appear in blue): 1) In order to calculate the required price, enter arc price elasticity (F32), present quantity sold (F34), current price (F36) and desired quantity (F40). 2) In order to calculate the quantity sold given a certain price change, enter price elasticity (F50), present quantity sold (F52), current price (F54) and the new price that will be charged (F58). ELASTICITY CALCULATIONS Sample data have been entered as an example. If arc price elasticity equals -3.00 and your present quantity sold is 1000.00 at price 6.00 your revenue is 6000.00 and the quantity you wish to sell is 1200.00 the price you will have to charge will be 5.65 and your revenue will be 6776.47 If arc price elasticity equals -3.00 and your present quantity sold is 1000.00 at price 6.00 your total revenue is 6000.00 then, if you change your price to 5.65 your quantity sold will be 1200.04 and your revenue will be 6776.61

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