Answered: At Webs-R-Us, a website design company,…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...

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At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 45%. She estimates that the price elasticity of demand for Webs-R-Us is −0.70.

The manager expects the number of websites designed to decrease by?

Expert Solution

Step 1

In the very question, we are given price elasticity of demand which shows the degree of change in the quantity demanded with respect to the change in price.

Also, we are given a change in prices = 45%

As there is an inverse relationship between the prices and quantity demanded. Thus, given the increase in prices will result in a decrease in the quantity demanded.

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