The ABC Co. manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28. If the demand for ABC’s product has an elasticity coefficient of −3, how many will it sell per month if the price is lowered to $22?The competitor decreases its price to $24. If cross-price elasticity between the two radios is 0.3, what will ABC’s monthly sales be?

Price elasticity shows the % change in demand due to the % change in price. Formula Ed=-∆Q∆P×PQ…

Answered: The ABC Co. manufactures digital clock…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The ABC Co. manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28.

If the demand for ABC’s product has an elasticity coefficient of −3, how many will it sell per month if the price is lowered to $22?
The competitor decreases its price to $24. If cross-price elasticity between the two radios is 0.3, what will ABC’s monthly sales be?

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