AMA Exam PCM Topic 5 Question 85 Discussion

Actual exam question for AMA's PCM exam

Question #: 85
Topic #: 5

[All PCM Questions]

Novel Electronics sold 400 Technova smartphones in the first week of October 2013 at a price of $250 per unit. The following week, it reduced the price to $230 per unit and it saw sales increase by 20%. What is the price elasticity of demand of Technova smartphones?

A0.5

C1.5

E2.5

Show Suggested Answer

Suggested Answer: B

by Verona at Apr 21, 2024, 06:06 PM

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Zoila

21 days ago

Wait, isn't price elasticity of demand always a positive number? I thought the formula was (% change in quantity) / (% change in price). If that's the case, then the answer should be C) 1.5.

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Eleonora

22 days ago

Haha, I bet the exam writers are hoping to catch us out with this one. Gotta love those trick questions! I'm going to go with D) 2, just to keep them on their toes.

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Golda

1 days ago

I agree with you, I also think the answer is B) 1.

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Marleen

3 days ago

I'm going with B) 1, it seems like a reasonable choice based on the information given.

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Maryanne

8 days ago

I think the answer is A) 0.5, because the price decrease led to a 20% increase in sales.

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Wilda

1 months ago

This is a tricky one. The question gives us the price and sales changes, but we need to calculate the price elasticity formula to get the right answer. I'll give it a shot with C) 1.5.

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Olive

3 days ago

I think the formula for price elasticity is the percentage change in quantity demanded divided by the percentage change in price.

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Lorrie

2 months ago

I'm not sure about this one. Shouldn't the price elasticity be somewhere between 0 and 1 since the demand for Technova smartphones seems relatively inelastic? I might go with B) 1.

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Howard

1 months ago

Yes, that sounds like the most reasonable choice based on the information given.

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Ardella

1 months ago

So, would you go with option A) 0.5 then?

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Gaston

1 months ago

I agree. Since the demand increased by 20% when the price decreased by 8%, it seems like the price elasticity is around 0.5.

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Sean

2 months ago

I think you're on the right track. The price elasticity of demand for Technova smartphones is definitely less than 1.

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Mauricio

2 months ago

Hmm, this question is testing our knowledge of price elasticity of demand. I think the answer is C) 1.5, since a 20% increase in sales due to a 8% decrease in price (from $250 to $230) would suggest a price elasticity of demand of around 1.5.

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