Electronics Warehouse The Electronics Warehouse, Inc. is a leading wholesaler of AM/FM digital clock radios. The electronics wholesale business is highly competitive, so the demand for digital clock radios is very price-sensitive. In fact, the marketing department has estimated the own-price elasticity faced by The Electronics Warehouse for its digital clock radios is about -3. The Electronics Warehouse sells 3,000 units monthly at a price of $25 per unit to retailers. Its closest competitor sells a similar radio that it sells for $28 per unit. a. How many units will the Electronics Warehouse sell if it decides to drop its price to $22 per unit? b. The marketing department has also estimated that the cross-price elasticity of demand between the two radios is 0.3. What will sales be for the Electronics Warehouse if the competitor decides to cut the price of its radios to $24 if the Electronics Warehouse maintains its price at $25?

Electronics Warehouse The Electronics Warehouse, Inc. is a leading wholesaler of AM/FM digital clock radios. The electronics wholesale business is highly competitive, so the demand for digital clock radios is very price-sensitive. In fact, the marketing department has estimated the own-price elasticity faced by The Electronics Warehouse for its digital clock radios is about -3. The Electronics Warehouse sells 3,000 units monthly at a price of $25 per unit to retailers. Its closest competitor sells a similar radio that it sells for $28 per unit. a. How many units will the Electronics Warehouse sell if it decides to drop its price to $22 per unit? b. The marketing department has also estimated that the cross-price elasticity of demand between the two radios is 0.3. What will sales be for the Electronics Warehouse if the competitor decides to cut the price of its radios to $24 if the Electronics Warehouse maintains its price at $25?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Electronics Warehouse
The Electronics Warehouse, Inc. is a leading wholesaler of AM/FM digital clock radios. The
electronics wholesale business is highly competitive, so the demand for digital clock radios is
very price-sensitive. In fact, the marketing department has estimated the own-price elasticity
faced by The Electronics Warehouse for its digital clock radios is about -3. The Electronics
Warehouse sells 3,000 units monthly at a price of $25 per unit to retailers. Its closest competitor
sells a similar radio that it sells for $28 per unit.
a. How many units will the Electronics Warehouse sell if it decides to drop its price to $22 per
unit?
b. The marketing department has also estimated that the cross-price elasticity of demand
between the two radios is 0.3. What will sales be for the Electronics Warehouse if the
competitor decides to cut the price of its radios to $24 if the Electronics Warehouse
maintains its price at $25?
1

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