A chain discount structured as 7 / 4 / 2 indicates an initial discount of 7%, followed by a 4% discount, and finally a 2% discount.
Net Price = Original Price x Net Price Factor
Net Price Factor = ( 1 - 0.07 ) * ( 1 - 0.04 ) * ( 1 - 0.02 ) =
= 0.93 * 0.96 * 0.98 = 0.874994
Net Price = $1,219 * 0.874944 = $1,066.56
Answer:
PED = 0.67 indicates inelastic demand.
This suggests that reducing the book's price is not advisable.
Explanation:
To calculate price elasticity of demand, we utilize the midpoint formula: {(Q2 - Q1) / [(Q2 + Q1) / 2]} / {(P2 - P1) / [(P2 + P1) / 2]}
PED is computed as follows: {(50 - 40) / [(50 + 40) / 2]} / {(25 - 35) / [(25 + 35) / 2]} = [10 / (90 / 2)] / [-10 / (60 / 2)] = (10 / 45) / (-10 / 30) = 0.222 / -0.333 = 0.67
The value of PED = 0.67 implies that the demand does not respond greatly to price changes.
If you proceed to lower the book's price, the rise in the number of copies sold will not be enough to offset the loss from the reduced price, resulting in financial loss.
