Olay’s Cosmetics, Inc., offers a line of cosmetics and perfume products marketed through leading department stores. Product manager John Henry recently raised the suggested retail price on a popular line of mascara from Rs.12 to Rs.15 following increases in the costs of labor and materials. Unfortunately, sales dropped sharply from 17200 to 10000 units per month. In an effort to regain lost sales, manager hired a consultant. The consultant found after investigation that Olays competitors decreased the price of popular line of mascara similar to that sold by Olays from Rs.12 to Rs.10. Consultant suggested that Olay should run a coupon promotion featuring Rs.5 off the new regular price. The promotion was judged to be a success, as it proved to be highly popular with consumers. In the period prior to expiration, coupons were used on 40% of all purchases and monthly sales rose to 16,000 units. Calculate the arc price elasticity implied by the initial response to the Olays price increase. In light of the sale reductions of Olays product and the decrease in price of competitors product, calculate Olays cross price elasticity of demand.
Olay’s Cosmetics, Inc., offers a line of cosmetics and perfume products marketed through leading department stores. Product manager John Henry recently raised the suggested retail
Calculate the arc price elasticity implied by the initial response to the Olays price increase.
In light of the sale reductions of Olays product and the decrease in price of competitors product, calculate Olays cross
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