solution plz The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units permonth over the last year. Recently, its closest competitor Banana company reduced the priceof its smart phone from $350 to $300. As a result, Pear's sales declined by 1,500 units permonth.(a) What is the cross price elasticity of demand between the Pear and Banana smart phone?Use the averaging formula. What does this indicate about the relationship between the twoproducts?(b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, whatprice would the Pear company have to charge to sell the same number of units as it did beforethe Banana company price cut? Assume that Banana company holds its price of its phoneconstant at $300. Use the averaging formula.

The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $350 to $300. As a result, Pear's sales declined by 1,500 units per month.

The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $350 to $300. As a result, Pear's sales declined by 1,500 units per month.

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 8E: The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per...

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Question

solution plz

The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units per
month over the last year. Recently, its closest competitor Banana company reduced the price
of its smart phone from $350 to $300. As a result, Pear's sales declined by 1,500 units per
month.
(a) What is the cross price elasticity of demand between the Pear and Banana smart phone?
Use the averaging formula. What does this indicate about the relationship between the two
products?
(b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, what
price would the Pear company have to charge to sell the same number of units as it did before
the Banana company price cut? Assume that Banana company holds its price of its phone
constant at $300. Use the averaging formula.

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