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You are an analyst employed by an airplane manufacturer that last year sold 50,000 ATR-72

aircrafts at $500,000 each. Your market research indicates that:

i) the price elasticity of demand for your aircrafts in −0.3. (or +0.3 in absolute value);

ii) the income elasticity of demand for your aircrafts is +2.7; and

iii) the cross price elasticity for your aircrafts with respect to the price of a comparable jet

manufactured by a competitor is +2.2.

a) Suppose that you expect a ceteris paribus decrease in average incomes of 7% this year

compared to last year. How many aircrafts do you estimate that your company will sell this

year? How will it impact total revenues?