Question
Nguyen Corporation's marketing manager believes that every 8% increase in the selling price of one of the company's products would lead to a 15% decrease
Nguyen Corporation's marketing manager believes that every 8% increase in the selling price of one of the company's products would lead to a 15% decrease in the product's total unit sales. The product's absorption costing unit product cost is $19.40. The variable production cost is $5.40 per unit and the variable selling and administrative cost is $2.20. Required: a. Compute the product's price elasticity of demand as defined in the text to two decimal places. b. Compute the product's profit-maximizing price according to the formula in the text.
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