Suppose that a new entry has decreased elasticity from -2 to -3 (made demand more elastic) and that your price, before the new entry, was $20.

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Answer to a math question Suppose that a new entry has decreased elasticity from -2 to -3 (made demand more elastic) and that your price, before the new entry, was $20.

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Gerhard

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93 Answers

E_1 = -2

E_2 = -3

P_1 = 20

\frac{-2}{-3} = \frac{P_2}{20}

\frac{2}{3} = \frac{P_2}{20}

P_2 = 20 \times \frac{2}{3}

P_2 = \frac{40}{3}

**Answer:**

P_2 = 13.33

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