Allen Corporation\'s vice president in charge of marketing believes that every 9% increase in the selling price of one of the company\'s products would lead to a 11% decrease in the product\'s total unit sales. The product\'s absorption costing unit product cost is $11.40. The variable production cost is $2.40 per unit and the variable selling and administrative cost is $5.80 per unit. Allen Corporation\'s vice president in charge of marketing believes that every 9% increase in the selling price of one of the company\'s products would lead to a 11% decrease in the product\'s total unit sales. The product\'s absorption costing unit product cost is $11.40. The variable production cost is $2.40 per unit and the variable selling and administrative cost is $5.80 per unit.The product\'s price elasticity of demand as defined in the text is closest to? Solution Price Elasticity e(p) = % Change in Quantity Demanded / % Change in Price As per the data given, Price Elasticity e(p) = - 11% /9% = -1.22.

1. Allen Corporation's vice president in charge of marketing believes that every 9% increase in the
selling price of one of the company's products would lead to a 11% decrease in the product's
total unit sales. The product's absorption costing unit product cost is $11.40. The variable
production cost is $2.40 per unit and the variable selling and administrative cost is $5.80 per
unit.
Allen Corporation's vice president in charge of marketing believes that every 9% increase in the
selling price of one of the company's products would lead to a 11% decrease in the product's
total unit sales. The product's absorption costing unit product cost is $11.40. The variable
production cost is $2.40 per unit and the variable selling and administrative cost is $5.80 per
unit.The product's price elasticity of demand as defined in the text is closest to?
Solution
Price Elasticity e(p) = % Change in Quantity Demanded / % Change in Price
As per the data given,
Price Elasticity e(p) = - 11% /9% = -1.22