Revnol, a manufacturer of cosmetics, prices its popular pink lipstick at $8. On the basis of test-marketing, Revnol believes that women between the ages of 18 and 20 have an own-price elasticity of –1.0 and that 60 percent of them are likely to purchase the product. In the age group from 21 to 25 years, the own-price elasticity is –1.2 and 50 percent of them are likely to buy. (i) In a market with 25,000 women aged 18 to 20, and 15,000 aged 21 to 25, how many lipsticks can the firm expect to sell at a price of $8 per unit? (ii) If Revnol were to cut prices by 10 percent, approximately how many more pink lipsticks would it expect to sell?
Revnol, a manufacturer of cosmetics, prices its popular pink lipstick at $8. On the basis of test-marketing, Revnol believes that women between the ages of 18 and 20 have an own-price elasticity of –1.0 and that 60 percent of them are likely to purchase the product. In the age group from 21 to 25 years, the own-price elasticity is –1.2 and 50 percent of them are likely to buy. (i) In a market with 25,000 women aged 18 to 20, and 15,000 aged 21 to 25, how many lipsticks can the firm expect to sell at a price of $8 per unit? (ii) If Revnol were to cut prices by 10 percent, approximately how many more pink lipsticks would it expect to sell?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Revnol, a manufacturer of cosmetics, prices its popular pink lipstick at $8. On the basis of test-marketing, Revnol believes that women between the ages of 18 and 20 have an own-
(i) In a market with 25,000 women aged 18 to 20, and 15,000 aged 21 to 25, how many lipsticks can the firm expect to sell at a price of $8 per unit?
(ii) If Revnol were to cut prices by 10 percent, approximately how many more pink lipsticks would it expect to sell?
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