16 Nov 2023

Posted on:

12 Apr 2023

0

# How did we get that percentage in question 6 i cannot fin it in my own

I was trying to see how did we get the value of 70.95% in question 6 but i cannot find how can someone please tell me how it is accomplished

Instructor
Posted on:

18 Jul 2023

0

Hi Sebastian,

thanks for reaching out! When you talk about question 6, do you mean the course exam, or a quiz question?

Best,

365 Eli

Posted on:

16 Nov 2023

1

Instructors! Let me know if I'm on the right track with my explanation of this answer. (And the original poster meant for the quiz question in section 9 [Price Elasticity of Purchase Probability: Results])

Overall Formula:

E = ΔY/Y * P/ΔP

where,

E is price elasticity
Y is purchase probability (ΔY is )

P is price of product

Given:

1) The price elasticity of purchase probability of a client at 2.56 is 0.7. Althought this is confusing, I think it means that at price = 2.56, the purchase probability = 0.7

(i.e) P = 2.56

Y = 0.7

2) While their price elasticity: −1.22

(i.e) E = -1.22

3) If we lower the price of the product by 0.02, the new probability of purchase is?

(i.e) What is Y new when ΔP = -0.02

[ ΔY = (Y new - Y)

and ΔP = (P new - P).  Since we are lowering price, (P new - P) is -ve ]

Therefore,

-1.22 = ΔY/0.7 * 2.56/-0.02

ΔY = 0.0067

(i.e) (Y new - Y) = 0.0067

Y new = 0.0067 + 0.7 = 0.7067 or 70.67%

[P.S. I realise the answer is slightly low than the correct answer, so I am not sure if my approach is correct or coincidence]