The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfighter, reduced the price of its electric toothbrush from $35 to $25. As a result, Stopdecay's sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecay's toothbrush and Decayfighter's toothbrush? -0.62 0.62 -1.61 O 1.61 The value of the arc cross elasticity between these products suggests that they are If Stopdecay knows that the arc price elasticity of demand for its toothbrush is -1.6, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. O $25.00 O $28.46 O $21.96 O $30.75 It Stopdecay does not change its price, the average monthly total revenue would be the same number of units as it did before, the average monthly total revenue would be Should Stopdecay change the price of its electric toothbrush? Yes; as calculated, changing the price increases the total revenue. No; as calculated, changing the price lowers the total revenue. O It is unclear based on the information given. On the other hand, if it changes the price to sell
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfighter, reduced the price of its electric toothbrush from $35 to $25. As a result, Stopdecay's sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecay's toothbrush and Decayfighter's toothbrush? -0.62 0.62 -1.61 O 1.61 The value of the arc cross elasticity between these products suggests that they are If Stopdecay knows that the arc price elasticity of demand for its toothbrush is -1.6, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. O $25.00 O $28.46 O $21.96 O $30.75 It Stopdecay does not change its price, the average monthly total revenue would be the same number of units as it did before, the average monthly total revenue would be Should Stopdecay change the price of its electric toothbrush? Yes; as calculated, changing the price increases the total revenue. No; as calculated, changing the price lowers the total revenue. O It is unclear based on the information given. On the other hand, if it changes the price to sell
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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Transcribed Image Text:The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest
competitor, Decayfighter, reduced the price of its electric toothbrush from $35 to $25. As a result, Stopdecay's sales declined by 1,500 units per
month.
What is the arc cross elasticity of demand between Stopdecay's toothbrush and Decayfighter's toothbrush?
-0.62
0.62
-1.61
O 1.61
The value of the arc cross elasticity between these products suggests that they are
If Stopdecay knows that the arc price elasticity of demand for its toothbrush is -1.6, what price would Stopdecay have to charge to sell the same
number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30.
$25.00
$28.46
$21.96
$30.75
It Stopdecay does not change its price, the average monthly total revenue would be
the same number of units as it did before, the average monthly total revenue would be
Should Stopdecay change the price of its electric toothbrush?
Yes; as calculated, changing the price increases the total revenue.
No; as calculated, changing the price lowers the total revenue.
It is unclear based on the information given.
On the other hand, if it changes the price to sell
Expert Solution
Step 1
Here given information is:
- Stopdecay's initial quantity (Q1): 8,000 per month
- Stopdecay's final quantity (Q2): 6,500 per month
- Stopdecay's price (Ps1): $25
- Decayfighter's initial price (Pd1): from $35
- Decayfighter's final price (Pd2): $25
To find: cross elasticity of demand
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