Johnson & Johnson recently reduced the price of "Generic A" from $100 to $60 in New Jersey area market and enjoyed a resulting increase in sales from 600 to 1800 units per day. Sales of "Generic B" also increased from 300 to 1500 units per day. 1 Calculate the arc-price elasticity of demand for Generic A. You also need to interpret the elasticity. 2 Calculate the arc-cross-price elasticity of demand for Generic B. You also need to interpret the elasticity. 3 Is Generic B a "complement" or a "substitute"?
Johnson & Johnson recently reduced the price of "Generic A" from $100 to $60 in New Jersey area market and enjoyed a resulting increase in sales from 600 to 1800 units per day. Sales of "Generic B" also increased from 300 to 1500 units per day. 1 Calculate the arc-price elasticity of demand for Generic A. You also need to interpret the elasticity. 2 Calculate the arc-cross-price elasticity of demand for Generic B. You also need to interpret the elasticity. 3 Is Generic B a "complement" or a "substitute"?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Microeconomics
Assignment 5 Elasticity and its Application [10 points]
Johnson & Johnson recently reduced the price of "Generic A" from $100 to $60 in New Jersey
area market and enjoyed a resulting increase in sales from 600 to 1800 units per day. Sales of
"Generic B" also increased from 300 to 1500 units per day.
1
Calculate the arc-price elasticity of demand for Generic A. You also need to interpret the
elasticity.
2
Calculate the arc-cross-price elasticity of demand for Generic B. You also need to interpret the
elasticity.
3
Is Generic B a "complement" or a "substitute"?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffe0c496d-c058-466b-9c22-f76372887470%2F3ff165d1-0a49-44d2-ab42-e5a79c0ec739%2F4lv8mn_processed.png&w=3840&q=75)
Transcribed Image Text:Microeconomics
Assignment 5 Elasticity and its Application [10 points]
Johnson & Johnson recently reduced the price of "Generic A" from $100 to $60 in New Jersey
area market and enjoyed a resulting increase in sales from 600 to 1800 units per day. Sales of
"Generic B" also increased from 300 to 1500 units per day.
1
Calculate the arc-price elasticity of demand for Generic A. You also need to interpret the
elasticity.
2
Calculate the arc-cross-price elasticity of demand for Generic B. You also need to interpret the
elasticity.
3
Is Generic B a "complement" or a "substitute"?
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