Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 12, Problem 1MC
To determine
Less elastic demand.
Expert Solution & Answer
Explanation of Solution
When the promotion makes the demand for a particular good less elastic, then the increase in the
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Chapter 12 Solutions
Managerial Economics: A Problem Solving Approach
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- 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, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, 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. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?arrow_forwardIsabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?arrow_forwardThe price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joeās 66 station is -1.2. Explain what might account for the different elasticities.arrow_forward
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