Answer to Question #113993 in Economics of Enterprise for khuthala

Question

Explain the type of pricing strategy that you as the manager of a
company would implement for Good X and Good Y with the following price elasticity of demand co efficients. Use diagrams to motivate your answer.


a). Good X: 2.3
(b). Good Y: 0.6

Answer 1

Good X and Y are substitutes because the cross price elasticity of demand is positive.lf the price of good X rises,the demand for good Y increases.Therefore the company manager should adopt a competitive marketing strategy that increases the quantity demanded for good x .