You own a company selling wristwatches. This is its inverse demand equation: Q = 10 - (P/60) Part A: Suppose the current market price is $120 per watch. The pandemic has caused major supply shortages and the price is expected to rise to $300 per watch next month. Calculate the price elasticity of demand for this expected change in price (from $120 to $300). Show your steps. Part B: Your store manager has informed you that revenue from the next month would not be maximized with this expected price of $300. Should you agree with your manager or not? i.e. would it make more sense to raise price beyond $300 per watch in order to increase revenues further?

You own a company selling wristwatches. This is its inverse demand equation: Q = 10 - (P/60) Part A: Suppose the current market price is $120 per watch. The pandemic has caused major supply shortages and the price is expected to rise to $300 per watch next month. Calculate the price elasticity of demand for this expected change in price (from $120 to $300). Show your steps. Part B: Your store manager has informed you that revenue from the next month would not be maximized with this expected price of $300. Should you agree with your manager or not? i.e. would it make more sense to raise price beyond $300 per watch in order to increase revenues further?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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