THE PROBLEMS BELOW ARE DUE FOR HOMEWORK ON TUESDAY, FEBRUARY 3
You may write your answers in the spaces provided on this sheet. If you need extra space, use
the backs of pages.
TOTAL POINTS = 40
NAME_________________________________
1. TheNile.com, the online bookseller, wants to increase its total revenue.
Currently, every book it sells is priced at $10.50. One suggested strategy is
to offer a discount that lowers the price of a book by $9.50, a 10%
reduction in price using the midpoint formula. TheNile.com knows that
its customers can be divided into two distinct groups (Group A and Group B)
according to their likely responses to the discount.
Group A Group B
Volume of sales before
10% discount (in
millions)
1.55 1.50
Volume of sales after
10% discount (in
millions)
1.65 1.70
a. Using the midpoint formula, calculate the price elasticities of
demand for Group A and for Group B. SHOW WORK. (10 points)
