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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Lorrie

7 days 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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Mauricio

9 days 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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