Malcolm Manufacturing is an electronics manufacturer and retailer. Its main products are notebooks, PCs and calculators. The current price of the notebook is $500, the PC is $800, and the calculator is $40. This year the firm sold 5,000 notebooks, 10,000 PCs and 1 million calculators. To improve revenues, the managers of the firm have decided to increase all prices by 15%., other things held constant. Market research has suggested that the price elasticity of demand for each product is: Notebook: 0.5; PC: 2.5; Calculator: 1.5 You have been asked to evaluate the planned price increases. 1. Comment on the planned price changes. How will these changes impact revenues of each product? Ans: 2. Would a 10% price reduction have been better for some or all of the products? Ans:
Malcolm Manufacturing is an electronics manufacturer and retailer. Its main products are notebooks, PCs and calculators. The current price of the notebook is $500, the PC is $800, and the calculator is $40. This year the firm sold 5,000 notebooks, 10,000 PCs and 1 million calculators. To improve revenues, the managers of the firm have decided to increase all prices by 15%., other things held constant. Market research has suggested that the price elasticity of demand for each product is: Notebook: 0.5; PC: 2.5; Calculator: 1.5 You have been asked to evaluate the planned price increases. 1. Comment on the planned price changes. How will these changes impact revenues of each product? Ans: 2. Would a 10% price reduction have been better for some or all of the products? Ans:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Malcolm Manufacturing is an electronics manufacturer and retailer. Its main products are
notebooks, PCs and calculators. The current price of the notebook is $500, the PC is $800, and
the calculator is $40. This year the firm sold 5,000 notebooks, 10,000 PCs and 1 million
calculators.
To improve revenues, the managers of the firm have decided to increase all prices by 15%., other
things held constant.
Market research has suggested that the price elasticity of demand for each product is:
Notebook: 0.5;
PC: 2.5:
Calculator: 1.5
You have been asked to evaluate the planned price increases.
1.
Comment on the planned price changes. How will these changes impact revenues of each
product?
Ans:
2. Would a 10% price reduction have been better for some or all of the products?
Ans:
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