A firm produces two goods, x and y, such as Apple producing high-end and lower-end Apple watches or a restaurant producing beer and pizza. We recall the formula: AR= = [(1 + Eq. p. )* R¸ + Eq, p. *R, ]*%AP, P P O *. Regarding this formula, a) The cross-price elasticity, when negative, helps ameliorate the revenue consequences of an increase in the Price of x as consumers shift to purchases of y. b) The revenue consequences of a decrease in the Price of x are heightened when the two goods are complements. c) The cross-price elasticity, when positive, helps ameliorate the revenue consequences of an increase in the Price of x. d) Both b) and c) above. e) None of the above.
A firm produces two goods, x and y, such as Apple producing high-end and lower-end Apple watches or a restaurant producing beer and pizza. We recall the formula: AR= = [(1 + Eq. p. )* R¸ + Eq, p. *R, ]*%AP, P P O *. Regarding this formula, a) The cross-price elasticity, when negative, helps ameliorate the revenue consequences of an increase in the Price of x as consumers shift to purchases of y. b) The revenue consequences of a decrease in the Price of x are heightened when the two goods are complements. c) The cross-price elasticity, when positive, helps ameliorate the revenue consequences of an increase in the Price of x. d) Both b) and c) above. e) None of the above.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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![A firm produces two goods, x and y, such as Apple producing high-end and lower-end Apple watches or a restaurant producing beer and pizza. We recall the formula:
AR = [(1 + Eq. p. )* R₂ + Eq‚ ‚¸ * R₂ ] * %
³x
y
O
X
Regarding this formula,
a) The cross-price elasticity, when negative, helps ameliorate the revenue consequences of an increase in the Price of x as consumers shift to purchases of y.
b) The revenue consequences of a decrease in the Price of x are heightened when the two goods are complements.
c) The cross-price elasticity, when positive, helps ameliorate the revenue consequences of an increase in the Price of x.
d) Both b) and c) above.
e) None of the above.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb5fb60f6-4c07-4b8e-aacf-d85c725d62df%2F329ee0c0-fbf3-4ec8-a3b7-6ded0f87ef8c%2Fgslbs_processed.png&w=3840&q=75)
Transcribed Image Text:A firm produces two goods, x and y, such as Apple producing high-end and lower-end Apple watches or a restaurant producing beer and pizza. We recall the formula:
AR = [(1 + Eq. p. )* R₂ + Eq‚ ‚¸ * R₂ ] * %
³x
y
O
X
Regarding this formula,
a) The cross-price elasticity, when negative, helps ameliorate the revenue consequences of an increase in the Price of x as consumers shift to purchases of y.
b) The revenue consequences of a decrease in the Price of x are heightened when the two goods are complements.
c) The cross-price elasticity, when positive, helps ameliorate the revenue consequences of an increase in the Price of x.
d) Both b) and c) above.
e) None of the above.
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