The demand curve for a product is given by QDx = 1,200 – 3Px – 0.1Pz, where Pz=$300. a) What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $140? b) What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $240? c) Are goods X and Z substitutes or complements? What is the cross-price elasticity of demand between goods X and Z when Px = $140?
The demand curve for a product is given by QDx = 1,200 – 3Px – 0.1Pz, where Pz=$300. a) What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $140? b) What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $240? c) Are goods X and Z substitutes or complements? What is the cross-price elasticity of demand between goods X and Z when Px = $140?
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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- a) What is the own
price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $140? - b) What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $240?
- c) Are goods X and Z substitutes or complements? What is the cross-price elasticity of demand between goods X and Z when Px = $140?
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