Required information You are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is −3 and the cross-price elasticity of demand between products Y and X is −1.6. Suppose you increase the price of good X by 2 percent. Assume that the information about product X and product Y from the problem changed to the following: Revenues per year from product X $ 20,000 Revenues per year from product Y $ 75,000 Own price elasticity of demand for product X −3 Cross-price elasticity of demand between products X and Y −1.5 Price increase of product X (percent) 2 Instruction: Update the data in your spreadsheet to the values above and enter the recomputed answer for the original question. Required: How much will your firm’s total revenues (revenues from both products) change? Change in revenues: ____________________
Required information You are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is −3 and the cross-price elasticity of demand between products Y and X is −1.6. Suppose you increase the price of good X by 2 percent. Assume that the information about product X and product Y from the problem changed to the following: Revenues per year from product X $ 20,000 Revenues per year from product Y $ 75,000 Own price elasticity of demand for product X −3 Cross-price elasticity of demand between products X and Y −1.5 Price increase of product X (percent) 2 Instruction: Update the data in your spreadsheet to the values above and enter the recomputed answer for the original question. Required: How much will your firm’s total revenues (revenues from both products) change? Change in revenues: ____________________
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Required information
You are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price
Assume that the information about product X and product Y from the problem changed to the following:
Revenues per year from product X | $ | 20,000 |
Revenues per year from product Y | $ | 75,000 |
Own price elasticity of demand for product X | −3 | |
Cross-price elasticity of demand between products X and Y | −1.5 | |
Price increase of product X (percent) | 2 | |
Instruction: Update the data in your spreadsheet to the values above and enter the recomputed answer for the original question.
Required:
How much will your firm’s total revenues (revenues from both products) change?
Change in revenues: ____________________
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