(Solution Download) Use Arc Elasticity of Demand to determine % change in Price and Quantity

Variables given:
Output = 20,000
Price = $10
Fixed costs = $60,000
AVC = $6 (a 10 % decrease output decreases AVC to $5.40)
Arc price elasticity of Demand is -2.0

Solution given:
%?P = -.05 = (P2 - 10)/((P2 + 10)/2)
P2 = 9.51

%?Q = .10 = (Q2 - 20,000)/((Q2 + 20,000)/2)
Q2 = 22,100

Question:
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