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Answer to Question #43819 in Other Economics for Zohaib

Question #43819
The ABC company manufactures AM/FM clock radios and sells on average 3,000 units monthly at Rs.25 each to retail stores. Its closest competitor produces a similar type of radio that sells for Rs.28.

a) If the demand for ABC product has an elasticity coefficient of -3, how many will it sell per month if the price is lowered to Rs.22?
b) The competitor decreases the price to Rs.24. If cross-elasticity between the two radios is 0.3 what will the ABC's monthly sales be??
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Comments

Assignment Expert
08.11.18, 18:57

Dear Nimo,
(Q2-3000)*(-0.3/13) = -0.3/13Q2 + 900/13
Here we can multiply -0.3/13Q2 by 10/10:
-(0.3*10)/(13*10)Q2 = -(3)/(130)Q2

Nimo
08.11.18, 15:30

-3/130Q2? How it come?

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