Sunita's Socks Company normally charges $7.50 per pair. Sales have been strong, at 800 sold per week on Amazon. Sunita decides to try to take advantage of the good sales by raising the price to $8.50. Sales dropped to 650 the week after the price increase.

1. What is the calculated price elasticity of Sunita's Socks for that week?

2. Are her sock prices elastic _______ or inelastic ________?

3. Sunita wants to reduce the price elasticity of her socks. What could help the most?

1. _____ Reduce the price to $8.25.
2. _____ Try to brand her product by renaming it Sunita's Kitten Socks.
3. _____ Require a minimum order size of 5 pairs.
4. _____ Sell on Overstock.com as well.

4. A week goes by. Sunita kept the price at $8.50 and made no other changes. That week Sunita sells 760 pairs. This highlights the fact that:

1. _____ Doing nothing is usually the best strategy.
2. _____ Her customers must have gotten big pay increases.
3. _____ Amazon must have gotten a lot more customers that week.
4. _____ In the real world, price elasticity is unstable and hard to measure.

5. Sunita decides to recalculate her price elasticity by comparing (a) the average of the two weeks of sales since the price increase to (b) the 800 sales rate from before the price increase. What is the newly calculated price elasticity?

______________